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Pimco Total Return Had $7.5 Billion of Redemptions

Pimco Total Return Fund Had $7.5 Billion of Redemptions in July
Bill Gross, co-chief investment officer of Pacific Investment Management Co. (PIMCO). Photographer: Andrew Harrer/Bloomberg

Bill Gross’s Total Return Fund, the world’s biggest mutual fund, had its third straight month of withdrawals as investors continued to flee bonds.

Clients pulled an estimated $7.5 billion from Pacific Investment Management Co.’s Total Return Fund, leaving the fund with $262 billion in assets at the end of July, research firm Morningstar Inc. said today in an e-mailed statement. Jeffrey Gundlach’s DoubleLine Total Return Bond Fund had $580 million of net redemptions in July, after suffering its first monthly withdrawals in June since opening in April 2010, Chicago-based Morningstar said.

The flight from bond funds was triggered by Federal Reserve Chairman Ben S. Bernanke, who rattled markets in May and June by outlining a plan to end the central bank’s unprecedented asset purchases. Bernanke told reporters June 19 that policy makers may start decreasing those purchases later this year and end them by mid-2014 if the economy meets expectations.

Investors pulled about $60 billion from U.S. bond funds in June, the biggest monthly redemptions in records going back to 1961, according to estimates from the Investment Company Institute. They’ve pulled about $9.5 billion from the funds through July 24, according to ICI estimates.

Pimco Total Return Fund had a record $9.9 billion in redemptions during June, as Pimco’s mutual funds in the U.S. had $14.5 billion in net withdrawals in the month, according to Morningstar.

Fund Returns

Pimco Total Return lost 0.2 percent in the past month, trailing 59 percent of peers, according to data compiled by Bloomberg. The fund declined 3.1 percent this year, putting it behind 84 percent of similarly managed funds, the data show. Over the past five years, it has returned an average of 7.2 percent, ahead of 91 percent of rivals.

Pimco, based in Newport Beach, California, is a unit of Munich-based insurer Allianz SE. The firm had about $6.6 billion in net deposits into core and noncore strategies during the second quarter, with noncore products such as unconstrained bond funds attracting almost $20 billion, Dieter Wemmer, chief financial officer of Allianz, said today during a conference call with analysts and investors discussing the insurer’s earnings.

Mark Porterfield, a spokesman for Pimco, declined to comment on the withdrawals.

Cash Cushion

“The DoubleLine Total Return Bond Fund enjoyed substantial inflows in July, but a greater magnitude of redemptions resulted in a net outflow for July,” Loren Fleckenstein, an analyst at Los Angeles-based DoubleLine, said in an e-mailed statement.

The fund’s cash cushion has allowed DoubleLine to meet redemptions without being obliged to sell securities, Fleckenstein said.

Gundlach’s DoubleLine fund is down 0.2 percent in the past month, ahead of 69 percent of peers, and lost 0.5 percent this year, beating 81 percent of rivals, according to data compiled by Bloomberg. Over the past three years, DoubleLine Total Return Bond Fund gained an annualized 8.1 percent to beat 99 percent of similarly managed funds.

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