Summary List Placement
One of the most prominent investment consultants that advises public pension plans and other clients has placed Pimco on a so-called watch list, after several employees filed discrimination claims against the $2.2 trillion money manager in recent years, Insider has learned.
Money managers are often added to consultant watch lists due to fund performance issues, organizational concerns, or departures of key investment staff. Being added to a consultant watchlist can slow a money manager’s ability to attract new client assets or trigger heightened scrutiny over existing contracts, since consultants recommend and rate funds for pension plans, endowments and foundations, serving as gatekeepers to trillions of institutional assets.
The investment consultant NEPC recommended that Pimco be placed on watch in a due diligence report presented last month to the Alameda-Contra Costa Transit Employees’ Retirement Plan, which had $53.9 million invested with Pimco as of Dec. 31.
For firms that land on NEPC’s watch list, “issues have surfaced to be concerned over,” the report, published online by the California retirement plan, said. When on watch, a money manager “can participate in future searches, but current and prospective clients must be made aware of the issues,” the report said.
The heightened scrutiny from NEPC and institutional investors comes as Newport Beach, California-based Pimco has faced a raft of gender discrimination and harassment claims by current and former employees in recent years.
Since 2018, Boston-based NEPC has flagged the lawsuits filed against Pimco in its due diligence reviews of the firm, raising concerns about the asset manager’s culture, public investor documents show.
“In conversations with clients, we have reiterated that Pimco is committed to providing employees with an inclusive workplace that is free of discrimination, harassment and retaliation of any kind and follows strict procedures when informed of allegations of misconduct,” a Pimco spokesperson said in a statement to Insider.
“Pimco holds its employees to the highest ethical standards, so anyone found to have engaged in harassment, discrimination, sexual impropriety or any other misconduct would have no place at the firm,” the spokesperson added.
Pimco is not alone as a prominent money manager facing discrimination and harassment allegations by employees. But the claims in recent years alleging systemic issues inside the fixed-income manager reflect a firm that has been in transition since Chief Executive Emmanuel Roman took over in 2016 — and an industry coming to terms with its overwhelmingly white, male-dominated history.
Last month, three women who have worked at Pimco as assistants joined a complaint filed in Orange County Superior Court detailing accusations of sexual harassment against the firm, including two men who once held influential roles there: its former global head of corporate communications and former chairman of the Pimco funds board.
The three women joined a suit filed in November by their lawyer, Nancy Abrolat, who is also representing two separate women — a manager on Pimco’s administrative support team, and a vice president of alternative operations — who say they faced harassment and discrimination.
The plaintiffs are seeking an unspecified amount in general and compensatory damages, legal costs, and other damages. In response to the lawsuit, Pimco last week denied the women’s claims in a filing in Orange County Superior Court.
“Pimco vigorously denies that it discriminated, harassed, or retaliated against plaintiffs in any matter, allowed a pay disparity that gives rise to equal pay violations, defrauded or made any misrepresentations to plaintiffs, violated plaintiffs’ privacy, or violated obligations to take reasonable steps to prevent or correct any type of retaliation, harassment, or discrimination,” the firm said in the filing.
A spokesperson for the Alameda-Contra Costa Transit Employees’ Retirement Plan said in an email to Insider that NEPC “is aware of the lawsuit” against Pimco that was filed in November and amended in February, and “has taken proactive steps.”
“Two NEPC internal committees have placed Pimco on watch, which includes but is not limited to engagement with Pimco about its diversity and equity inclusion,” the spokesperson wrote, confirming later that the retirement board voted to accept NEPC’s quarterly report “in its entirety.”
An NEPC spokesperson declined to comment on the matter, citing the consultant’s policy “not to discuss client-specific matters.”
Here is a timeline of NEPC’s view on Pimco in recent years.
- In February, NEPC notified the California-based Alameda-Contra Costa Transit Employees’ Retirement Plan of the gender and disability discrimination lawsuit filed against Pimco. The consultant also noted that the lawsuit “follows on similar complaints in 2018 and 2019” against the money manager, according to NEPC’s due diligence report.
- NEPC notified the investor that its “Unfavorable News Committee met on December 7, 2020 and recommends that the Due Diligence Committee place Pimco on watch.”
- “NEPC will monitor the suit for resolution and any findings or other information pertaining to the issue. NEPC will engage with Pimco on their specific efforts relating to diversity equity and inclusion, as well as metrics relating to the topic,” the report said.
- In September 2019, Abrolat also represented one of the firm’s senior in-house lawyers, Andrea Martin Inokon, who sued the firm for gender, racial, and disability discrimination. Pimco denied the allegations from Inokon, a Black woman who currently works for Pimco. Inokon’s case is ongoing.
- Regarding this case, NEPC presented a due diligence report in February 2020 to another investor client, a university. NEPC said it “would like to hear the results of internal investigations around the specific ‘fraternity culture’ allegations,” made against Pimco, according to the report.
- “At this time we believe this filing is a specific employment dispute and are recommending no action. We will continue speaking with Pimco and update information and/or due diligence status accordingly,” the report said.
- In April 2018, Stacy Schaus, who was an executive vice president and head of Pimco’s defined contribution practice, filed a lawsuit that alleged gender- and age-based discrimination at the company. The suit was ultimately settled, and Schaus retired from the firm in November 2018.
- In a 2018 due diligence report to the university, NEPC wrote, “Ms. Schaus is one of the most well-known DC investment professionals in the industry, and is well-known to both NEPC and NEPC clients. This news is concerning and NEPC is reaching out to Pimco for the firm’s response.” The consultant recommended that Pimco be placed on watch at the time.
- Following the retirement of Schaus from Pimco and lawsuit settlement, NEPC said that Pimco could be removed from watch status at the end of 2019, another due diligence report published by the university said.
- “As a reminder, we placed Pimco on watch status after learning of this litigation and in consideration of this lawsuit in addition to what we know of Pimco’s culture. The watch remains until year end, as there remains the risk that a financial settlement around this claim brings forward further claims,” NEPC’s report said.