Pimco, Western Asset Lose Mercer Bond Fund Mandate

Pacific Investment Management Co. and Western Asset Management Co. were dropped by consultant Mercer as managers of a bond fund that had more than $1 billion in assets as of last year.

The Mercer Core Fixed Income Fund will be managed by Income Research & Management and the investment unit of Prudential Financial Inc., according to a regulatory filing yesterday by New York-based Mercer, a unit of Marsh & McLennan Cos. The fund, formerly known as the Mercer Core Opportunistic Fixed Income Fund, had about $1.1 billion in assets as of Sept. 30, according to a semi-annual report filed with the U.S. Securities and Exchange Commission.

Pimco, manager of the world’s biggest bond fund, has suffered investor withdrawals from its mutual funds for 10 straight months and underperformance by the $232 billion Pimco Total Return Fund (PTTRX), run by Bill Gross. Its former Chief Executive Officer Mohamed El-Erian, who was viewed as Gross’s heir apparent, said in January he was leaving Pimco, triggering a management shakeup.

Mercer’s decision to pull the mandate from Pimco was unrelated to El-Erian’s departure since the discussion that led to the change took place last year, said a person familiar with the situation who asked not to be identified because the matter is private.

TCW Win

Pimco was replaced by TCW Group Inc. as a manager of a $1.3 billion bond fund offered by Columbia Management Investment Advisers LLC last month. The decision to change the mandate was made late last year before El-Erian announced his resignation, two people familiar with the matter said at the time.

Pimco, a Newport Beach, California-based unit of German insurer Allianz SE, manages about $1.9 trillion in assets. Western Asset, based in Pasadena, California, oversees $452 billion and is the largest bond unit of Legg Mason Inc.

Bruce Lee, a spokesman for Mercer, declined to comment as did Mary Athridge, a spokeswoman for Western Asset parent Legg Mason and Mark Porterfield, a spokesman for Pimco.

The core fixed income strategy is part of about 10 Mercer funds offered as collective trusts to institutional investors that use subadvisers to manage funds, according to Mercer’s website and the semi-annual report.

To contact the reporter on this story: Alexis Leondis in Washington at aleondis@bloomberg.net

To contact the editors responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net Sree Vidya Bhaktavatsalam

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