Thu, Nov 06, 2014 - Page 15 News List

Investors withdraw US$27.5 billion from PIMCO

NY Times News Service

The asset drain at Pacific Investment Management Co (PIMCO) continues.

The bond giant said on Tuesday that investors withdrew US$27.5 billion from its flagship Total Return fund last month, shrinking the size of the world’s largest bond fund to US$171 billion.

In its release, PIMCO was quick to point out that nearly half of the sum was removed in the five days following the departure of manager Bill Gross.

Nevertheless the size of the monthly outflow underscores the challenge PIMCO faces to persuade investors to stick with the company following months of management turmoil and — in the case of Total Return — middling performance.

To date, Total Return trails 79 percent of its peers, according to Morningstar.

PIMCO executives say they accept that until these figures show marked improvement, the outflow is likely to continue.

And while it is true that PIMCO Total Return remains the world’s largest bond fund, the once yawning gap between itself and its peers is narrowing.

For example, fast-growing investment firm Doubleline said this week that its own total return vehicle had attracted US$1.8 billion in assets last month, bringing the fund’s size to US$38 billion.

That is still quite a distance from US$171 billion, but the trend is clear enough, and at this size, PIMCO’s total return fund is at its lowest level since July 2009.

Like many bond funds, PIMCO is betting that growth at home and abroad will remain stagnant and that central banks will keep interest rates low and print money to buy bonds. In such an environment, PIMCO managers have said that higher yielding assets such as emerging markets and mortgage securities in the US will be winning investments.

PIMCO’s exchange-traded fund has also had sharp outflows of late, losing US$1 billion since Gross left.

And while half of this amount came after he left, the withdrawals have continued since then with one of the largest daily outflows — US$51 million — on Friday.

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