That complexity may have seemed at odds with Gross' reputation as someone who was able to simplify the arcane workings of the bond market for a growing community of investors - many of them disappointed with stocks - who were looking to put their savings in high-performing bond funds. PIMCO's flagship fund, the Total Return Fund, which Gross founded in 1987 and was still running at the time of his departure, became the largest actively managed mutual fund in the world, with about $222 billion ($253 billion) in assets under management. But it used to be a lot bigger. Since the middle of last year, Gross' fund has bled close to $70 billion, as investors have taken out money for 16 consecutive months. This retreat is the result of a period of subpar performance for the fund and, some analysts believe, the very public dispute that Gross had with his deputy Mohamed A El-Erian, who left PIMCO in January. Still, for those investors who have kept the faith, Gross had continued to be the face of the fund and the firm. On Friday, analysts from Sanford C. Bernstein & Co. estimated that as much as 30 per cent of all investor money at PIMCO, which manages $2 trillion in assets, could follow its co-founder out the door.

When it comes to bonds, PIMCO fund managers own nearly everything: commanding positions in U.S. Treasurys, government-owned companies in Russia and Brazil and every variety of mortgage security. Analysts believe that PIMCO ultimately became too big to be managed by one man. The abrupt departure of Gross briefly rattled a few markets and could lead to additional turmoil. Expecting a surge of outflows from PIMCO funds, speculators may be able to take aim at major PIMCO holdings and make bets that they will fall when PIMCO fund managers are forced to sell them. In a paper this month, the Bank of International Settlements, which calls itself a bank for central banks, warned of dangers in the tremendous growth of the asset management industry. Many of the larger managers, it turns out, were investing in the same securities, be they Italian government bonds or bonds of Petrobras, the Brazilian oil giant. Especially vulnerable, the paper said, were funds with a large component of retail investors, who are prone to leave their positions more quickly than institutional funds are.

All it takes, the bank said in effect, is for one fund to start selling. If the selling is pronounced enough, others will follow. PIMCO, for example, has become one of the larger holders of Italian government bonds, and exposure to Italy in its Total Return Fund is 8 per cent, the second-highest country position after the US. That fund also holds a range of Spanish and Greek government bonds When news of Gross' departure was made public, the prices of Spanish and Italian bonds fell slightly, along with the Mexican peso. Gross has identified Mexico as an investment favourite. For years, Gross had taken advantage of low interest rates, deploying sophisticated strategies and hiring smart managers to produce a streak of superior performance. Then he forecast interest rates would rise. When they did not, the fund suffered.

PIMCO "thought interest rates would spike, and they were wrong," said Russel Kinnel, a mutual fund analyst at Morningstar in Chicago. Prominent investors like Gross often make bad calls and they usually recover. But concerns over the management turmoil and Gross' odd behaviour - in June, he wore sunglasses while giving an investor presentation - apparently made investors less willing to stick with the fund. Gross has recently said in speeches and investment letters that he expects interest rates to remain fairly low during a period of weak growth and negligible inflation throughout the world. In such an environment, investing in higher-yielding, riskier bonds and derivatives can be a way to increase returns, although the downside is that investors lose their sense of what their fund is trying to accomplish. What remains uncertain is whether his successor shares this view - and whether that person can stem the flow of money out of PIMCO's funds. Still, in today's increasingly complex markets, it will be PIMCO's gigantic size that will worry regulators concerned about financial stability and investors looking for better returns.

"I am not so sure that the challenge for Bill Gross was the large fund he managed," said Tjornehoj. "It was the challenge of the large company." New York Times