PIMCO Suffers Over $100 Billion in Withdrawals

November 30th, 2014 11:13 pm | by John Jansen |

Via the FT:

Pimco suffers $100bn in redemptions from top funds

Pimco has accounted for half of the 10 funds with the biggest outflows so far this year – bleeding more than $100bn – as rivals snatched market share from the world’s largest bond manager while it struggled to contain management infighting.

Five of the 10 funds with the heaviest customer redemptions so far this year are run by the California company, and several more have suffered multibillion-dollar outflows.

The data highlight how Pimco’s weak performance began before the resignation in September of founder Bill Gross and extends beyond the funds that he personally managed.

Mr Gross’s former Total Return and Unconstrained Bond funds top the list of biggest redemptions in 2014 so far, with Pimco funds investing in high-yield bonds, leveraged loans and equities also suffering heavy withdrawals.

The league table of US fund flows, by research group Morningstar, paints a stark picture of how savers have shifted money to other managers, led by Vanguard, MetWest and Goldman Sachs.

It also reveals how longer-term trends in the mutual fund industry have continued to play out in 2014, including the vast asset accumulation of tracker funds from Vanguard, the low-cost market leader, and the decline of traditional active management funds by Fidelity and Capital Group’s American Funds.

Mr Gross quit as chief investment officer at Pimco as other executives plotted to oust him. Institutional clients, financial advisers and individual savers began questioning their relationship with the firm earlier in the year, after a period of poor performance by its main funds and amid mounting headlines about internal discontent.

The Pimco Total Return fund has shed $75bn because of client withdrawals this year, according to Morningstar, whose data run to the end of October. Five Pimco funds – four previously managed by Mr Gross – are in the bottom 10 performers in terms of outflows so far this year.

Other Pimco funds not run by Mr Gross that have suffered redemptions of more than $1bn this year include its High Yield fund, which suffered withdrawals of $5.1bn, and its EqS Pathfinder value investing fund, whose clients redeemed about $1.6bn. Pimco’s Floating Income fund has suffered withdrawals of $1.5bn, or 61 per cent of its assets at the start of the year.

Pimco said outflows had slowed dramatically since their peak after Mr Gross’s resignation: “The performance of our flagship Total Return fund is among the best of its peers in November and, longer-term, we’ve delivered alpha in the majority of our US mutual fund assets over the last three years.”

Vanguard’s index tracker funds dominate the rankings for most inflows this year, in part because they include contributions to the firm’s popular multi-asset retirement funds. Its Total Stock Market Index Fund, which overtook Pimco Total Return Bond fund last year to become the largest mutual fund in the world, took in $30bn.

The most popular US actively managed funds of 2014 are all bond funds, confounding expectations at the start of the year for a “great rotation” of investor assets out of fixed income and into equities, in anticipation of rising interest rates, which hurt the value of bonds.

The single biggest beneficiary of the rebound in active fixed income flows and the turmoil at Pimco has been the MetWest Total Return bond fund, run by Tad Rivelle and Laird Landmann, which had inflows of $14bn in the first 10 months of the year. However, with $40.5bn in assets, it remains less than a quarter the size of the Pimco Total Return Bond fund.

The non-Pimco fund suffering the largest redemptions this year was the Thornburg International Value equity fund, which reshuffled its portfolio management team amid poor returns. Clients have withdrawn the equivalent of 44 per cent of its assets at the start of the year.

Amid doubts over whether large active equity managers can outperform the market, Fidelity switched some large institutional holders of its big mutual funds into cheaper collective investment trusts.

Greatest mutual inflows in 2014
Fund Net assets YTD flows Organic growth
Vanguard Total Stock Market Index Fund $321.5bn $30.0bn 11.7%
Vanguard Total International Stock Index Fund $129.6bn $22.4bn 21.1%
Vanguard Five Hundred Index Fund $165.8bn $18.9bn 17.2%
Vanguard Total Bond Market Index Fund $106.7bn $17.9bn 22.3%
Metropolitan West Total Return Bond Fund $40.5bn $14.0bn 55.3%
Goldman Sachs Strategic Income Fund $26.1bn $11.7bn 81.3%
BlackRock Strategic Income Opportunities Portfolio $22.8bn $11.2bn 99.9%
Dodge & Cox International Stock Fund $64.1bn $8.9bn 16.6%
Vanguard Total Bond Market II Index Fund $85.3bn $8.9bn 12.2%
Dodge & Cox Income Fund $34.7bn $8.8bn 35.8%
Greatest mutual outflows in 2014
Fund Net assets YTD flows Organic growth
Pimco Total Return Fund $170.9bn -$75.1bn -31.6%
Pimco Unconstrained Bond Fund $13.8bn -$13.6bn -50.8%
Thornburg International Value Fund $14.7bn -$12.6bn -44.3%
Fidelity Contrafund $109.6bn -$9.6bn -8.7%
Fidelity Growth Company Fund $41.9bn -$8.3bn -18.2%
American Funds Growth Fund of America $143.7bn -$6.6bn -4.7%
Pimco Low Duration Fund $17.6bn -$6.4bn -26.8%
Pimco High Yield Fund $11.1bn -$5.1bn -32.7%
Pimco EM Fundamental IndexPlus AR Strategy Fund $3.7bn -$4.7bn -57.9%
Fidelity Series High Income Fund $7.3bn -$4.0bn -36.7%
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