Related
Half of those redemptions from the Pimco Total Return Fund (PTTRX) occurred in the first five trading days of October and they then “slowed sharply,” according to a statement from the Newport Beach, California-based firm yesterday. The redemptions followed $23.5 billion in withdrawals from the world’s biggest fund in September and brought assets to $170.9 billion, down 42 percent from a peak in April 2013.
“This could easily go into the first quarter before you see the flows ebb,” said Michael Rosen, chief investment officer at Angeles Investment Advisors LLC in Santa Monica, California, who oversees $47 billion for endowments and pensions. “There’s a fair amount up for play over the next few months or so.”
Pimco has hired back three high-profile names in re
cent weeks as it seeks to reassure clients rattled by Gross’s Sept. 26 departure. Investors are reviewing their allocations, moving money to competitors such as Vanguard Group Inc. and DoubleLine Capital LP or parking it in money-market funds and exchange-traded funds while they reevaluate.
Bill Gross, co-founder and former chief investment officer of Pacific Investment Management Co.
Vanguard Overtakes
Investors pulled an estimated $48 billion from all Pimco mutual funds in October, according to Chicago-based research firm Morningstar Inc. Pimco Unconstrained Bond Fund, which was managed by Gross from December until his departure, suffered $4.5 billion in estimated withdrawals last month. The fund’s assets have declined by 49 percent since the beginning of the year to $13.8 billion, according to data compiled by Bloomberg. Another fund, Pimco Low Duration Fund, had withdrawals of about $2.5 billion last month, according to Morningstar.Pimco Total Return, which was once the biggest U.S. mutual fund, is now the third-largest in the nation as offerings from Vanguard have overtaken it, according to data compiled by Bloomberg. The largest daily redemption in September came the day of Gross’s departure, Pimco said Oct. 1 in a statement.
Vanguard, known for its low-cost indexing funds, attracted more money in the first 10 months of this year than it in any full calendar year in its 39-year history. It has received $163.4 billion in its mutual funds and exchange-traded funds this year.
Doubled Size
Pimco Total Return had more than doubled in size from $132 billion at the end of 2008, after weathering the financial crisis with returns that beat 83 percent of rivals. It ballooned to a peak of $293 billion in April 2013, before the Federal Reserve first hinted it would unwind stimulus measures, sparking investor redemptions and unsteady performance.
Bill Gross, who co-founded Pimco in 1971 and built it into a $1.87 trillion money... Read More
The fund had a 53 percent cash position as of Sept. 30, and a 51 percent offset related to derivatives including futures and swaps, according to the firm’s website. Ten percent of its holdings were invested in emerging markets, 20 percent in mortgage-related securities and an additional 13 percent in U.S. credit.
Gross had relied on derivatives to juice returns in the second quarter, replacing most of the $48 billion of U.S. Treasuries in Total Return with about $45 billion of futures, according to an August filing. The contracts require small up-front payments, freeing up money for the fund to invest in higher-yielding securities including Brazilian, Spanish and Italian debt.
High Liquidity
“The liquidity profile of the Fund remains high, and, as always, the Fund is being managed consistent with the firm’s market outlook and alpha strategies while meeting diminishing redemptions,” the firm said in the statement yesterday.The new chiefs are trying to calm clients, saying there will be no major changes in investment strategy at Total Return.
“It’s business as usual,” Mather said in a telephone interview in September after the management changes.
Pimco is bringing back old members of the investment committee including Marc Seidner, who had left in the wake of former Chief Executive Officer Mohamed El-Erian’s departure. Nobel Laureate Michael Spence returned to Pimco as a consultant and money manager Jeremie Banet rejoined as executive vice president last week.
Gross, who co-founded Pimco in 1971 and built it into a $1.87 trillion money manager, departed after his deputies including now group Chief Investment Officer Daniel Ivascyn threatened to quit and management debated his ouster, according to people familiar with the matter. He abruptly resigned to run an unconstrained fund at money manager Janus Capital Group Inc. (JNS)
Client Withdrawals
Clients have been withdrawing assets from the Pimco Total Return Fund since May 2013. Returns in the past 12 months of 3.4 percent trailed 65 percent of comparable funds, according to data compiled by Bloomberg. Over five years, the fund beat 63 percent of peers.Last year, Total Return lost a record $41.1 billion from client redemptions, according to estimates from Morningstar.
Prudential Financial Inc., former Pimco parent Pacific Life Insurance Co., Massachusetts Mutual Life Insurance Co., Alabama’s Treasury and Florida’s state pension have all moved money from Pimco in recent weeks.
(In a previous version of the story, Vanguard corrected investor subscriptions for 2014.)
No comments:
Post a Comment