'Bond King' Gross suffers twelfth month of Pimco fund outflows

NEW YORK Thu May 1, 2014 6:59pm EDT

Bill Gross, Manager of the world's biggest bond fund at Pacific Investment Management Co. (PIMCO) participates in the Obama administration's Conference on the Future of Housing Finance in the Cash Room of the Treasury Building in Washington, August 17, 2010. REUTERS/Jason Reed

Bill Gross, Manager of the world's biggest bond fund at Pacific Investment Management Co. (PIMCO) participates in the Obama administration's Conference on the Future of Housing Finance in the Cash Room of the Treasury Building in Washington, August 17, 2010.

Credit: Reuters/Jason Reed

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NEW YORK (Reuters) - The flight from the Pimco Total Return Fund continued apace in April with investors withdrawing another $3.1 billion, the 12th straight month of outflows from the world's largest bond fund, run by Bill Gross.

The fund has now seen a total of $55.26 billion in net outflows since last May, according to Morningstar data on Thursday. The Pimco Total Return Fund had $230 billion in assets under management at end of April, down from a peak of $292.9 billion in April 2013.

April's pace of redemptions was even with the March withdrawal rate.

The Pimco Total Return Fund also continued its string of lackluster returns in April of 0.74 percent, trailing 68 percent of its peers, according to preliminary data from Morningstar.

The fund also trailed the benchmark Barclays U.S. Aggregate bond index's return of 0.84 percent for the month. Over the past 12 months, the fund has trailed the Barclays index by 1.45 percentage points.

Gross, co-founder of Newport Beach, California-based Pimco and dubbed the market's "Bond King," is still dealing with a public falling-out with former heir-apparent Mohamed El-Erian, who shared the co-chief investment officer title.

Several U.S. institutional investors, including retirement systems, said they are closely monitoring the developments at Pimco and have formally put Pimco on "watch lists," a signal that they will keep a much closer eye on performance than usual.

The management shakeup led Morningstar analysts to downgrade Pimco's overall stewardship grade by one notch to a C in March, reflecting a higher degree of uncertainty after the departure of El-Erian and other key personnel. Morningstar analysts also cited reports that Pimco's atmosphere has long been characterized as a "pressure cooker" and that Gross has demonstrated "at-times severe and reputed retaliatory temperament."

PIMCO ETF ALSO SUFFERING

The Pimco Total Return Exchange-Traded Fund, an actively managed ETF designed to mimic the strategy of the flagship mutual fund, also saw net outflows in April of $75 million, according to estimated data by Morningstar. Total assets in the fund at the end of April were $3.4 billion.

The net asset value of the Pimco Total Return Exchange-Traded Fund rose 0.73 percent last month, trailing 70 percent of its peers.

The problems at Pimco have benefited rivals.

Jeffrey Gundlach's DoubleLine Capital said on Thursday it had $442.5 million of net inflows into its open-end funds for April, the third consecutive month of new cash for the Los Angeles-based firm.

So far this year, the DoubleLine Funds have seen $929 million of net inflows, the firm said. For its part, Gundlach's flagship $32 billion DoubleLine Total Return Bond Fund had about $320 million of inflows for the month, according to DoubleLine.

The DoubleLine Total Return is posting returns of 3.1 percent year-to-date, surpassing the benchmark Barclays U.S. Aggregate Bond Index, which has returns of 2.7 percent.

Ron Redell, the president of DoubleLine Funds, said: "I believe the continued strong demand for our investment strategies are attributed to our consistency in portfolio management personnel and a successful long-term track record focused on risk management and performance."

Newport Beach, California-based Pimco, or the Pacific Investment Management Co, a unit of European financial services company Allianz SE, had $1.94 trillion in assets as of March 31, according to the firm's website. Gross is the firm's co-founder and chief investment officer.

DoubleLine Capital, where Gundlach is chief executive officer and chief investment officer, has $49 billion in assets.

(Reporting by Sam Forgione and Jennifer Ablan. Editing by Andre Grenon)

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Comments (3)
lysergic wrote:
If Mr. Gross had not been such a jerk I think quite a few of the investors would have stayed with him. In short, he did it to himself.

May 01, 2014 11:57pm EDT  --  Report as abuse
RD137 wrote:
The “Bond King” ??…I thought the US Federal Reserve is the bond king. In the not too distant future they’ll own/control more than half the US bond market. Good luck trying to unwind that!

May 01, 2014 12:21am EDT  --  Report as abuse
dd606 wrote:
Stuff like this is actually more disturbing than normal market fluctuations, because with those, at least they’re typically based on some sort of reality. This is nothing more than media induced, mass hysteria. It’s like one person saying ‘fire’ and everybody runs for the door. Nothing that has happened really justifies this reaction. There was a time when virtually everyone would have recommended them as the premiere bond fund to hold. So if it can happen to them, it can happen to anybody. Another good reason to hold funds that have as little active management as possible.

May 01, 2014 12:45am EDT  --  Report as abuse
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