Pimco Total Return Has $23.5 Billion in Redemptions in Worst Month Ever

By Charles Stein

Bill Gross, former co-founder and co-chief investment officer of Pacific Investment Management Co.

Related

• Pimco Total Return Fund Has Record $23.5B in Redemptions
• Pimco’s Devlin: Redemptions Not an Issue With Gross Exit

The Pimco Total Return Fund (PTTRX), managed by Bill Gross until last week, suffered an estimated $23.5 billion of withdrawals last month, its worst month ever for redemptions.
The largest daily redemption occurred Sept. 26, the day of Gross’s departure, Newport Beach, California-based Pacific Investment Management Co. said today in a statement. The biggest previous monthly withdrawal was $9.6 billion in June 2013, according to Morningstar Inc. The redemptions represent 10.6 percent of assets at the end of August, when Pimco Total Return had $221.6 billion in client money.
The figures provide the first glimpse of redemptions at the world’s biggest bond fund after Gross, 70, abruptly resigned to join money manager Janus Capital Group Inc. (JNS) Funds led by top-performing money managers tend to be very sensitive to management changes. When Jeffrey Gundlach was ousted from TCW Group Inc. in December 2009 amid a dispute, the main fund he ran for that firm lost more than one-quarter of
assets to withdrawals within one week.
“I think you will see substantial redemptions for another two or three months,” Burton Greenwald, a mutual-fund consultant based in Philadelphia, said in a telephone interview. “It will continue until Pimco can demonstrate some stability.”

Photographer: Scott Eells/Bloomberg

Bill Gross, former co-founder and co-chief investment officer of Pacific Investment Management Co.

Gross departed after his deputies threatened to quit and management debated his ouster, according to people familiar with the matter. The departure of Gross, who co-founded Pimco in 1971, has prompted investors to review their investments with the firm and move money to competitors such as TCW and Gundlach’s DoubleLine Capital LP.

Shrinking Assets

Investors have been withdrawing assets from the Pimco Total Return Bond Fund since May 2013 in anticipation of rising interest rates and as performance at the Pimco Total Return has lagged behind competitors. The fund trailed 65 percent of rivals over the past year, according to data compiled by Bloomberg. Over five years, it beat 62 percent of peers.
Investors pulled a record $41.1 billion from the fund last year, according to Chicago-based Morningstar. It suffered an additional $24.8 billion in redemptions in the first eight months of 2014. After September’s withdrawals, the fund’s size has shrunk by about one-third from a peak of $293 billion in April 2013.
In 2013, Gross misjudged the timing and impact of the Federal Reserve’s plan to reduce its asset purchases. The performance of Pimco Total Return fund was hurt when former Federal Reserve Chairman Ben S. Bernanke hinted in May that the central bank might scale back its bond-buying program, a signal that sent rates higher and bond prices lower. This year, Gross bet on intermediate-term bonds which have underperformed longer-dated securities.