Neel Kashkari, who oversaw the U.S. Treasury's much-maligned
Troubled Asset Relief Program during the financial crisis, said he
is leaving Pacific Investment Management Co. to consider running
for public office in Democrat-heavy California, as a
Republican.
"As I look at California, there are huge problems," said Mr.
Kashkari in an interview, pointing to the state's budget troubles,
weak job market and problem-plagued public schools. "These
challenges are huge but they're of our own making--so they are
within our capacity to solve," he said.
Mr. Kashkari was hired by Pimco in 2009 to help turn the big
bond-fund company into a player in equity funds. Since then, the
unit of Allianz S.E. (ALIZF, AZSEY, ALV.XE) has launched six new
stock mutual funds.
Building an equity portfolio has been slow going. The six funds
had about $3.6 billion from U.S. investors, according to research
firm Morningstar, and $10 billion in all, according to Pimco,
including money from institutions and foreigners that Morningstar
doesn't tally. That is less than 1% of the $1.9 trillion that Pimco
manages.
The performance of funds Mr. Kashkari launched has been spotty.
All six funds lagged behind benchmarks assigned by Morningstar in
2012, using the institutional class of shares as the metric. Mr.
Kashkari said the funds were designed to limit downside risk and,
as a result, tend to lag when the market is rising.
Mr. Kashkari, 39 years old, didn't specify which political
office he is considering. But with no contests for U.S. Senate
seats from California until Democratic Sen. Barbara Boxer's term
expires in 2016, the next high-profile race in the state will be
the governor's post. Gov. Jerry Brown, 74, a Democrat, hasn't said
whether he plans to run again in 2014; a spokesman for the governor
reiterated that Mr. Brown hasn't made any "pronouncements" on
that.
A Republican would face an uphill battle for a statewide seat in
California, where every statewide office is held by a Democrat and
Republican registration has been shrinking as the state's
population becomes younger and more ethnically diverse. In 2010,
Meg Whitman, former chief executive of eBay Inc. (EBAY) and now
chief executive of Hewlett-Packard Co. (HPQ), ran for governor as a
Republican against Mr. Brown. She spent more than any gubernatorial
candidate in state history and ended with only 41% of vote.
"I'm not the typical California Republican. I'm the son of
immigrants," Mr. Kashkari said. "I come from modest upbringing. I
have a successful track record. I'm an optimist. And I think
something can be done if people work together."
He said he plans to seek advice from California Republicans and
Democrats before making any decisions, but already has launched a
campaign-style website at www.neelkashkari.com.
With his shaved head and cool demeanor under cross-examination
at televised hearings, Mr. Kashkari became the public face of TARP,
the $700 billion bank bailout launched during the George W. Bush
presidency, and continued during the first several months of the
Obama administration.
"Obviously TARP is very unpopular," Mr. Kashkari said. "But it's
the best example we have in modern history of Democrats and
Republicans coming together to do something controversial but
absolutely necessary and absolutely successful. .. Both Sacramento
and Washington, D.C., have a lot of politicians who want to do the
easy things which'll make them popular. We're out of easy things to
do."
A native of Akron, Ohio, Mr. Kashkari moved to California in
1997 as an aerospace engineer and later, after earning an MBA,
worked there for Goldman Sachs. He moved to Washington to work at
the Treasury in 2006 after Henry Paulson, who had been Goldman's
co-chief executive, became Treasury secretary.
Pimco, based in Newport Beach, Calif., manages the world's
largest bond fund, Pimco Total Return, which has assets of $285
billion.
The six funds Mr. Kashkari's 55-employee unit manages are Pimco
EqS Pathfinder Fund, Pimco Eqs Emerging Markets Fund, Pimco Eqs
Dividend Fund, Pimco Eqs Long/Short Fund, Pimco Emerging Multi
Asset Fund and Pimco Dividend and Income Builder. Pimco's stock
funds have been drawing new money, despite investors' shift away
from actively managed stock funds. They had net inflows of $316.5
million in the U.S. in 2012, according to Morningstar.
-- Vauhini Vara contributed to this article.
Write to David Wessel and Kirsten Grind at david.wessel@wsj.com
and kirsten.grind@wsj.com
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