Pacific Investment Management Co’s (PIMCO) biggest mutual fund had the worst year of client withdrawals in the history of fund management, as the firm lost both of its co-chief investment officers, Bill Gross and Mohamed El-Erian.
Investors pulled US$19.4 billion from PIMCO Total Return Fund last month, bringing redemptions last year to a record US$105 billion, according to data compiled by Bloomberg using information from Newport Beach, California-based PIMCO and Morningstar Inc.
Assets in the world’s biggest bond fund fell to US$143.4 billion as of Wednesday, according to a Friday statement from PIMCO, down by more than half from a peak of US$293 billion in April 2013.
“No doubt, it is the largest outflow for one year in [US] dollar terms” among money managers, said Russel Kinnel, director of mutual fund research at Chicago-based research firm Morningstar.
PIMCO is seeking to reassure investors and stem redemptions after Gross left on Sept. 26 last year, bringing back high-profile money managers and naming top performers to run its largest funds. The Total Return Fund, which was once the biggest US mutual fund, is now the fourth-largest as offerings from Vanguard Group Inc have overtaken it, according to data compiled by Bloomberg. The decline has erased more than five years of growth at the fund, bringing assets to 2008 levels.
“The pace of outflows during December continued to be significantly below the peak in September and early October 2014,” spokesman Daniel Tarman said in an e-mailed statement on Friday. “The fund’s experienced portfolio management team remains focused on pursuing investment opportunities designed to play out over the medium and long term, while retaining a focus on capital preservation and liquidity for shareholders.”
PIMCO can weather withdrawals from institutional and retail clients of as much as US$350 billion without hurting performance, according to Morningstar. PIMCO had US$1.87 trillion in assets under management as of Sept. 30 last year.
Last month’s redemptions from the fund followed a combined US$60.5 billion in September, October and November last year, including a record US$27.5 billion in October. In 2013, clients pulled US$41.1 billion from the fund, according to Morningstar estimates.
PIMCO Total Return, managed by chief investment officers Scott Mather, Mark Kiesel and Mihir Worah since Gross’ departure, trailed a majority of peers for the second straight year after missing a rally in longer-term bonds and betting that inflation would rise. The fund returned 4.7 percent last year, trailing 53 percent of comparable funds, after losing 1.9 percent in 2013, behind 65 percent of peers, according to data compiled by Bloomberg.
The fund had more than doubled from US$132 billion at the end of 2008, after navigating the financial crisis with returns that beat 82 percent of its rivals. Assets peaked in April 2013, before the US Federal Reserve hinted it would unwind stimulus measures, sparking redemptions and unsteady performance.
Gross, who cofounded PIMCO in 1971 and built it into one of the US’ largest money managers, resigned in September to run an unconstrained fund at Denver-based money manager Janus Capital Group Inc.
El-Erian, who shared the role of CIO with Gross and served as PIMCO’s chief executive officer, announced his resignation from the firm last January. El-Erian is now chief economic adviser at PIMCO’s parent Allianz SE and a contributor to Bloomberg View.
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