By Sam Forgione
NEW YORK Nov 4 Bill Gross's Pimco Total Return
Fund had outflows of $4.4 billion in October, stripping it of
its status as the world's largest mutual fund on lagging
performance this year, data from Morningstar showed Monday.
The outflows marked the sixth straight month of withdrawals
from the fund, and lowered its assets to $248 billion, according
to Morningstar data. For the year, the Pimco Total Return Fund
has had outflows of about $33.2 billion. The fund, which is
managed by Pimco co-founder and co-chief investment officer Bill
Gross, is still the world's largest bond fund, Morningstar said.
The Vanguard Total Stock Market Index now holds
the title of world's largest mutual fund with $251.1 billion,
according to Morningstar.
The status of Gross's fund is important because Pimco
manages roughly $1.97 trillion and is one of the world's largest
bond managers. Gross's, and co-chief investment officer and
chief executive Mohamed El-Erian's, views on global credit also
influence other investors. Newport Beach, California-based
Pacific Investment Management Co is a unit of European financial
services company Allianz SE.
Investors have continued to pull cash out of Gross's
flagship fund on fears interest rates will spike higher when the
Federal Reserve scales back its stimulus, said Eric Jacobson,
director of fixed income research at Morningstar.
Starting last May, bond interest rates shot higher on
concerns that the Fed would begin reducing its $85 billion in
monthly bond purchases. The yield on the benchmark 10-year U.S.
Treasury note rose above 3 percent in September from 1.62
percent in early May.
Morningstar's Jacobson, who has been covering Pimco for over
a decade, said that investors have likely withdrawn cash from
Gross's fund this year given the fund's stumbles in response to
those higher interest rates.
"Nobody's always going to be right on interest rate calls,
but because he has been known for getting them right for a long
time, it's a 'live-by-the-sword, die-by-the-sword' kind of
problem," said Jacobson.
The Pimco Total Return Fund rose 0.93 percent in October,
beating 50 percent of peers, according to Morningstar data. That
marked its second straight month of gains after the Fed decided
to keep its bond-buying steady in September and October,
sparking a rally in bond prices.
The fund stumbled in May, June, and August, however, and
for the year it is down 1.23 percent, beating 45 percent of
Pimco is not alone in experiencing outflows. Bond funds
worldwide had outflows of roughly $9.2 billion in October,
according to data from Bank of America Merrill Lynch and EPFR
The Pimco Total Return Exchange-Traded Fund, an
actively managed ETF designed to mimic the strategy of the
flagship mutual fund, had $117 million in outflows last month,
also marking its sixth straight month of outflows.
The ETF, which now has roughly $3.8 billion, rose 0.85
percent in October, beating 77 percent of peers, according to
Morningstar data. The ETF, which launched in February 2012, is
doing better for the year and is down 0.54 percent, beating 90
percent of its peers, according to Morningstar.
Investors pulled $4.7 billion from all of Pimco's U.S.
open-ended mutual funds last month, Morningstar said, marking
the fifth straight month of withdrawals from the firm.
Jeffrey Gundlach's DoubleLine Total Return Bond Fund
, had $1.1 billion in outflows in October, marking its
fifth straight month of outflows and bringing this year's
outflows to $3.1 billion, according to Morningstar.
The outflows came as the fund rose 0.64 percent last month,
ahead of just 14 percent of peers. For the year, the $34-billion
fund is outperforming and is up 0.45 percent, beating 90 percent
of its peers. DoubleLine had $1 billion in overall outflows from
its U.S. open-end mutual funds in October, also marking the
fifth straight month of outflows from the firm, according to
Los Angeles-based DoubleLine Capital had $56 billion in
assets as of June 30, according to the company's website.
Gundlach is DoubleLine's chief executive and chief investment
"The DoubleLine Total Return Bond Fund continues to share in
the net outflows that are being experienced by many
intermediate-term bond funds," said Loren Fleckenstein, analyst
"We also see this phenomenon mirrored in net flows into the
DoubleLine Low Duration Bond Fund because of fear of rising
The DoubleLine Low Duration Bond fund attracted
$242.4 million in new cash in October, Morningstar data showed.