When Mohamed El-Erian first told Bill Gross several weeks ago that he wanted to leave to “recharge the batteries,” the co-founder of Pacific Investment Management Co. was “shocked” and “discouraged.”

El-Erian, 55, for years had been putting in long hours as the public face of Pimco next to Gross, appearing in the office as early as 5 a.m., speaking on national television throughout the day, and responding to messages well past regular working hours. Gross, battling record redemptions from his biggest bond fund, tried to persuade El-Erian to stay.

“From our standpoint he was doing a great job,” Gross said in a phone interview from Newport Beach, California. “The answer we gave him was basically, ‘Hell no, you can’t go.’”

El-Erian, viewed as the successor to 69-year-old Gross in running the $237 billion Pimco Total Return Fund, stuck with his decision to step down as chief executive officer and co-chief investment officer of Pimco. The move took investors and analysts by surprise and forced Pimco to revisit its plans for a future after Gross, by naming two deputy CIOs. The firm is seeking to emphasize the depth of its investment talent by appointing several more in coming weeks, Gross said in the interview.

“I intend there to be a number of heirs apparent and for each of them to have assigned asset roles on a global basis with a global menu,” Gross said in the interview. “We’re not just bond people anymore.”

Money managers Andrew Balls and Daniel Ivascyn will become deputy investment chiefs, helping Gross oversee the firm’s $1.97 trillion. Gross said that as Pimco continues to evolve from a bond-centric firm to a diversified money manager, he intends to appoint investment professionals specializing in equities, global fixed income and other asset classes to leadership roles.

Douglas Hodge, the firm’s operating chief, will succeed El-Erian as CEO, though with no history in managing money he’s not a candidate to replace Gross in managing the Total Return Fund.

Pimco Total Return had record withdrawals of $41 billion last year as investors fled traditional bond funds because of rising interest rates. Pimco as a whole had $30.4 billion in net redemptions during 2013, compared with net deposits of $62.7 billion in 2012, the biggest drop in organic growth among the 10 largest U.S. mutual-fund families, according to Morningstar Inc.

The turbulence in the bond market over the past year isn’t the cause for El-Erian’s resignation, according to Gross. He cited other difficult times that El-Erian has weathered, such as turmoil in Brazil and Argentina when he invested in emerging-market debt.

“Total Return is more on my shoulders than his,” Gross said, referring to the firm’s biggest fund. “I didn’t notice any additional stress whatsoever. He’s a man that deals with stress and that’s part of his makeup.”

While the two occasionally disagreed, they’ve been “on the same page” in how they assessed the macroeconomic environment and the direction of the market, Gross said.

“He’s a classically trained economist, I’m sort of a seat-of-the-pants-economist. All of that in combination was just a sound match,” Gross said. “If there was a disagreement at all, it was his decision to leave.”

El-Erian plans to write a second book and spend more time with his family, Gross said. El-Erian’s “When Markets Collide: Investment Strategies for the Age of the Global Economy” was published in 2008. El-Erian didn’t respond to emails and phone calls seeking comment.

In an internal memo to employees, El-Erian said he has no plans as of now.

“What happens longer-term is an open question,” he wrote.

Gross brought El-Erian back to Pimco in 2007 following a stint running Harvard University’s endowment because he knew “Mohamed could fill an important part of the puzzle” in planning for succession, he said in a 2010 Bloomberg interview. El-Erian was responsible for transforming Pimco from a bond shop to a diversified fund manager, and led the firm’s push into equities in 2009.

Gross said growth in Pimco’s equity unit has been “disappointing” since then as the funds have been slow to gather assets and performance has been lackluster. Pimco’s four main U.S. equity mutual funds collectively manage less than $5 billion in assets.

A separate family of funds, the StocksPlus lineup, attempts to beat the stock market by using a combination of bonds and derivatives. Pimco intends to emphasize the performance of its StocksPlus family, led by Gross since he started them in the 1980s, he said. The $840 million Pimco StocksPlus Fund has averaged annual returns of 24 percent in the past five years, beating 91 percent of peers, according to data compiled by Bloomberg.

“The world obviously in terms of flows isn’t a bond-friendly climate,” Gross said. “We anticipated this when Mohamed came back and have been building ever since. In some cases not too well like with equities, and others very well like alternatives.”

Gross said some of the new deputy CIOs would be given seats on Pimco’s investment committee, which sets strategy guidelines for fund managers. Gross has no intention of scaling back his role even as he elevates other executives.

“Think of me sort of as a permanent fixture,” he said. “I’d like to be here for a long time.”

Under El-Erian, who made a name for himself investing in emerging-market debt early on in his career at Pimco, the bond firm more than tripled its assets under management as investors flocked to fixed income after the 2008 financial crisis. Money in non-traditional funds rose to 66 percent of Pimco’s assets from 56 percent when El-Erian became CEO, according to the internal memo to employees.

El-Erian is listed as manager of eight mutual funds with $10.2 billion, according to data compiled by Bloomberg, including two U.S. mutual funds. The Pimco Global Advantage Strategy Bond fund, opened in 2009 and run by El-Erian, has advanced 3.2 percent annually in the past three years, behind 53 percent of rivals, according to data compiled by Bloomberg. El-Erian’s Global Multi-Asset Fund has gained an annual 6.5 percent over the past five years, trailing 82 percent of similarly managed funds.

El-Erian, the son of an Egyptian diplomat who’s fluent in English, French and Arabic, joined Pimco in 1999 as a senior member of the money management and investment strategy group. He left in 2006 to serve as CEO of Harvard Management Co. and revamp the university’s endowment before rejoining Pimco in 2007. He also worked at the International Monetary Fund for 15 years, and served as a deputy director at the IMF from 1995 to 1997. El-Erian received a bachelor’s and master’s degree in economics from Cambridge University as well as a Ph.D. from Oxford University. (Bloomberg)