(Adds time period of when decision was made; byline)
By Jennifer Ablan
NEW YORK, March 20 Pacific Investment Management
Co. has been replaced by TCW Group Inc. as the subadvisor of a
$1.3 billion bond fund offered by Columbia Management Investment
In a statement on Thursday, TCW said the fund, previously
known as the Pimco Mortgage-Backed Securities Fund, will become
the TCW Core Plus Bond Fund. Initially launched in 2010, the
fund had invested significantly in highly rated mortgage
instruments and sought to provide shareholders with total return
through both income and capital appreciation.
Within its mutual fund families, TCW manages several
Morningstar five star-rated bond funds, including the MetWest
Total Return Bond Fund and the TCW Total Return Bond Fund. Over
the past three years, the MetWest Total Return Bond Fund
outperformed 95 percent of its peers, and the TCW Total Return
Bond Fund outperformed 98 percent of its peers.
According to a source familiar with the situation, the move
out of Pimco had been in the works since October and was
unrelated to the management shakeup at Pimco. Columbia
Management was not available for comment.
Pimco co-founder Bill Gross has been dealing with the public
fallout from his former heir apparent Mohamed El-Erian, who
shared the co-chief investment officer title with Gross.
On Feb. 24, the Wall Street Journal reported that former
Pimco CEO El-Erian's close relationship with Gross had soured as
the firm's investment performance deteriorated last year. Then
Gross told Reuters that his one-time lieutenant was trying to
"undermine" him and that he had "evidence" El-Erian "wrote" the
Morningstar Inc analysts have downgraded Pacific
Investment Management Co's overall stewardship grade by one
notch on Tuesday, reflecting a higher degree of uncertainty
after the departure of its El-Erian and other key personnel.
The research firm downgraded Pimco's stewardship grade to a
C from B following a comprehensive review of Pimco which
included a visit to the Newport Beach, California-based fund
company by Morningstar analyst Eric Jacobson on March 10. The
highest grade is an A and the worst is an F.
Pacific Investment Management Co., which had $1.91 trillion
of assets under management as of Dec. 31, is a unit of European
financial services company Allianz SE.
David Lippman, chief executive officer of TCW, said, "We are
pleased to continue to expand our partnership with Columbia
Management and look forward to putting our industry-recognized
expertise in fixed income to work for the benefit of investors
in the TCW Core Plus Bond Fund."
(Reporting By Jennifer Ablan; Editing by Cynthia Osterman)