Performance of Pimco Total Return Fund Hit by Departure of Bill Gross, Other Turbulence


Pimco founder Bill Gross

The performance of the Pimco Total Return Fund, the world’s largest bond fund, trailed most of its peers in 2014 after a turbulent year at fund manager Pimco, preliminary data from Morningstar showed on Wednesday, Reuters said.

The fund rose 4.36 percent in 2014 through Dec. 30, trailing 77 percent of its peers, the Morningstar data showed. Nevertheless, the gain marked a rebound from the fund’s loss in 2013, its first down year since 1999, the report said.

The Pimco fund came into 2014 taking on less risk, said Todd Rosenbluth, director of mutual fund research at S&P Capital IQ. “Unfortunately, as interest rates fell, taking on less risk actually hurt them versus their peers, ” Reuters quoted him as saying.

The yield on the U.S. 10-year Treasury note fell from 3.006 percent at the end of 2013 to trade most recently at 2.1791 percent.

In addition to falling interest rates, Pimco also had to contend with not one but two high-profile departures through the year, the report said.

In January, economist Mohamed El-Erian left amid reports of tensions with chief investment officer Bill Gross. Then, in September, Gross himself quit after months of clashes with the firm’s executive committee, leaving for smaller rival Janus Capital Group. That departure prompted a wave of outflows from nervous investors, Reuters said.

Nevertheless, the fund still held $162.8 billion in assets at the end of November, according to Pimco’s website.

“We still think this fund is risky and there are better options to choose from, ” Rosenbluth said. “But there’s still a lot of money tied to this fund.”

The Total Return Fund fell 0.8 percent in December to trail 95 percent of its peers, the report said.

The Pimco Total Return Exchange-Traded Fund’s net asset value fell 0.22 percent in the month, trailing 61 percent of peers, the data showed. But the ETF’s net asset value rose 6.7 percent for the year, putting it in the top percentile of its peer group, Reuters said.

Newport Beach, California-based Pacific Investment Management Co is a unit of German insurer Allianz SE.


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