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Pimco founder Bill Gross quits the firm he founded to join Janus Capital

Bill GrossBill Gross
Bill GrossPhotograph by Tim Boyle — Bloomberg/Getty Images

Bill Gross, who co-founded Pacific Investment Management, or Pimco, in 1971, will leave his own firm to join competitor Janus Capital.

Dubbed the “Bond King” (a moniker he acquired after Fortune ran this feature in the March 4, 2002, issue), Gross served as the firm’s chief investment officer and managed the Pimco Total Return fund — one of the world’s largest bond funds with more than $1.9 trillion in securities, according to the company’s website.

The news was a surprise to many on Wall Street. The fund has not done well for years, though, and lately has been plagued by huge outflows. CNBC reported Friday that Gross was about to be fired for “increasingly erratic behavior,” citing unnamed sources.

Pimco is considering Daniel Ivascyn to take over the CIO role vacated by Gross, according to a Bloomberg News report. German insurer Allianz, Pimco’s parent company, said this morning that it will announce a successor within the next several hours.

At Janus, Gross will manage the recently launched Global Unconstrained Bond fund and related strategies. He will work in partnership with Myron Scholes and other members of the global asset allocation team. Shares of Janus (JNS) surged as much as 40% following news that Gross would join the firm.

He will begin managing the fund on Oct. 6 out of a newly established Janus office in Newport Beach, Calif.

“I look forward to returning my full focus to the fixed income markets and investing, giving up many of the complexities that go with managing a large, complicated organization,” Gross said in a statement. “I chose Janus as my next home because of my long standing relationship with an drespect for CEO Dick Weil and my desire to get back to spending the bulk of my day managing clients.”

Weil and Gross worked together previously at Pimco from 1996 to 2010 when Weil left his role as chief operating officer to take over the top spot at Janus.

The move to Janus follows a tumultuous year and a half for Pimco. Gross’ co-CIO Mohamed El-Erian left the firm in May of last year in a move that stunned the finance world. There were reports that El-Erian left because of personal issues with Gross, and Gross later told Reuters that his deputy tried to “undermine” him. El-Erian will not return to Pimco to replace Gross, sources told Bloomberg’s Betty Liu.

Gross’ exit also comes in the middle of an investigation by the Securities and Exchange commission into possible fraud associated with his Pimco Total Return ETF.

Gross had also met with other firms, including DoubleLine Capital’s Jeffrey Gundlach. The leader of Pimco’s rival met last week to discuss working together, but Gundlach told Reuters that he “was never going to be the ‘co-guy.'”

Janus shares soared this morning following the announcement that Gross will join the firm. Its stock was up more than 33% as of mid-day Friday, a much needed boost after the company’s stock struggled this year following the firm’s own internal management upheaval.

“Even with the baggage that Gross brings with him from the turmoil that has surrounded Pimco over the past year or so,” wrote Morningstar analyst Greggory Warren. “We see the move as a likely positive for Janus Capital Group Shareholders.”