Bob Marley fans love “Redemption song” but redemptions are not exactly music to a fund manager’s ear. Redemptions are when clients withdraw their money from funds, and Pimco has been playing the redemption song for some time now, and with departures of managers and well as clients, the beat goes on.
Pimco’s Total Return Fund was the largest bond fund in the world, but it started having problems when Mohamad El-Erian left as Chief Executive last year after a disagreement with Bill Gross. This news made investors a bit queasy, and Bill Gross brought in Paul McCulley as kind of a PR move to show that everything was okay at Pimco. Clients had been withdrawing their money and leaving Pimco, a trend that intensified when Bill Gross left in September for Janus. Now with news that McCulley has left, one would think that things are chaotic at the Total Return Fund. The reality is, the fund is doing fine with its returns, but the redemptions continue.
Mark Kiesel, Scott Mather and Mihir Worah have been managing the Total Return fund since Gross’ departure, and it has returned 3.99%, outperforming its benchmark by 1.1% percentage points, according to Investors.com. However, January was the 21st consecutive month of redemptions, but the volume has been less: $12.5 billion compared to the $32.3 billion withdrawn when Gross left last September. In addition the Fund has shrunk 54% and is now no longer the largest bond fund in the world.