(Adds Pimco Total Return Fund's 5-year and 10-year performance
By Jennifer Ablan
March 31 Pacific Investment Management Co. has
been removed as subadvisor of two bond funds totaling $3.7
billion offered by ING U.S. Investment Management, though the
decision by ING was made late last year before a management
shakeup at Pimco, according to a regulatory filing with the SEC.
An ING spokeswoman told Reuters on Monday that the board of
the ING Funds in October approved the merger of ING Pimco Total
Return Bond Portfolio into the ING Intermediate Bond Portfolio.
The merger closed on March 21, she said.
The board also approved a change in October to the
subadvisor for ING PIMCO High Yield Portfolio, and a change to
its name and investment strategy, she said.
Effective Feb. 4, the portfolio was renamed ING High Yield
Portfolio and has since been subadvised by ING Investment
Management Co. LLC. The ING Intermediate Bond Portfolio will
also be managed internally, the spokeswoman said.
The changes were aimed at "overlapping ING Funds into those
with similar or compatible investment strategies" deemed in the
interest of shareholders by many board members, she said.
They would lead to "lower expense ratios, greater asset base
in the surviving portfolio, and reduced overlap in funds offered
in the ING Fund Complex," the spokeswoman said.
Pimco, based in Newport Beach, California, has been under
intense pressure amid investor withdrawals from its mutual funds
and underperformance by its largest fund, Pimco Total Return,
which is managed by Pimco co-founder Bill Gross.
The ING news also comes as Gross deals with a public
falling-out with his former heir-apparent, Mohamed El-Erian, who
shared the co-chief investment officer title with Gross.
Pimco, which is a unit of European financial services
company Allianz SE, didn't immediately respond to
requests for comment.
On Friday, Reuters reported that the Pimco Total Return
Fund, which holds $236.5 billion in assets and is the world's
largest bond fund, delivered a total return of just 1.28 percent
in the year through March 27, trailing 87 percent of its peer
funds this year.
The Total Return's lackluster performance so far this year
follows a dismal 2013, when misguided calls on how Federal
Reserve policy would play out in the bond market led to a loss
of 1.92 percent for the fund, its poorest showing in nearly two
decades. Pimco saw its assets under management shrink by $80
billion in 2013 due to outflows and negative returns, according
A spokesman at Pimco said: "It's important to compare a
fund's performance with its benchmark and not just with other
mutual funds, which could hold riskier and higher-yielding
assets. Total Return has outperformed its index for the past 6
months, 2, 5 and 10 years."
The Pimco Total Return Fund's long-term track record is
impressive. The fund's five-year and 10-year annualized returns
of 6.90 percent and 5.88 percent have outperformed the benchmark
Barclays U.S. Aggregate index by 2.04 percentage points and 1.41
percentage points, respectively, according to Morningstar data,
as of March 28.
(Editing by Bernadette Baum and Meredith Mazzilli)