(Adds fund flows, analyst comments, bylines)
By Sam Forgione and Jennifer Ablan
NEW YORK, June 2 Bill Gross' Pimco Total Return
Fund, the world's largest bond fund, posted $4.3 billion in net
outflows in May, marking its 13th straight month of investor
withdrawals despite achieving its best performance in four
months, Morningstar data showed on Monday.
The fund has seen $59.6 billion in outflows since its record
outflow streak began in May of last year, the data showed. The
fund had $229 billion in assets at the end of last month, down
from a peak of $292.9 billion in April of last year.
The outflows continued despite the fund's 1.25 percent gain
for the month, which beat 79 percent of peers and marked its
best return since January, according to preliminary Morningstar
data. That said, the Pimco Total Return fund is up just 3.32
percent for the year and is trailing 78 percent of its peers.
Analysts have said that outflows began last year on weak
performance, which led the fund to decline 1.9 percent for the
year, marking its worst performance in nearly two decades.
Manager Gross' public falling-out with former heir-apparent
Mohamed El-Erian, who shared the co-chief investment officer
title, also exacerbated investor unease.
Last week, Pimco said it had rehired Paul McCulley, who was
previously a portfolio manager and the bond giant's top analyst
of the U.S. Federal Reserve's policies, in the latest management
Gross, co-founder of Newport Beach, California-based Pimco
and dubbed the market's "Bond King," said in a statement last
week that McCulley "will be an important contributor to our
"The Pimco Total Return Fund delivered strong performance in
May ahead of 79 percent of peer funds as the bond market sided
with Pimco's 'New Neutral' view that policy rates will stay
lower for longer," a spokesman for Pimco said.
"We continue to see opportunity in bonds as a portfolio
diversifier and as a way to generate the kind of long-term
outperformance that our clients have come to expect from Total
Return and all of Pimco's strategies."
Pimco, 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.
BOOSTED BY BOND RALLY
The Pimco Total Return Fund's performance last month
slightly beat the benchmark Barclays U.S. Aggregate bond index's
return of about 1.14 percent. The fund likely benefited from a
rally in bond prices on weak U.S. economic data and signs that
the Federal Reserve would keep rates low for longer, said Todd
Rosenbluth, director of mutual fund research at S&P Capital IQ.
Gross has touted short-dated bonds in recent months on the
view that the Fed would keep rates low for longer. Gross has
said that while current Fed participants believe the central
bank's long-term neutral interest rate is 4 percent, Pimco
believes 2 percent is "closer to the mark."
Since longer-dated Treasuries rallied more than
shorter-dated Treasuries notes in May, however, the fund likely
surpassed peers in its security selection, said Rosenbluth.
"It actually seems like they've made good security
selection," he said. The Barclays 5-7 year U.S. Treasury index
rose 1.30 percent in May, while the Barclays 25 plus-year U.S.
Treasury index rose 3.05 percent.
The DoubleLine Total Return Bond Fund, a
competitor to the Pimco Total Return Fund run by Jeffrey
Gundlach, rose 1.13 percent last month, beating 55 percent of
its peers, the preliminary Morningstar data showed.
Los Angeles-based DoubleLine said Monday that it had about
$666 million of net inflows into its open-ended funds for May,
the fourth consecutive month of new cash for the firm. The
firm's flagship DoubleLine Total Return Bond Fund had about $502
million inflows for the month, according to DoubleLine.
DoubleLine Capital, where Gundlach is chief investment
officer and chief executive officer, said the firm had about
$1.6 billion inflows into its open-ended funds year-to-date.
Investors realized earlier this year that the bond market
sell-off was "overdone," and pension funds and insurers saw the
increase in bond yields as an opportunity to shift money out of
stocks into bonds, which were factors that caused a resumption
of inflows into bond portfolios, said Ronald Redell, president
of DoubleLine Funds.
"The various fixed income teams at DoubleLine have done a
good job managing actively through the vagaries of credit and
interest-rate risks," Redell said. "So we along with other
active bond managers are receiving our share of investment flows
into fixed income."
(Reporting by Sam Forgione and Jennifer Ablan; editing by James
Dalgleish, Chizu Nomiyama and Cynthia Osterman)