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Pimco Total Return Posts $1.6 Billion in Redemptions

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PIMCO Co-CIO Bill Gross
Pimco Total Return, which is the firm’s largest fund and accounted for about 12 percent of its $1.9 trillion in assets as of Dec. 31, has stemmed the rate of withdrawals as investors returned to fixed-income strategies last month. Photographer: Andrew Harrer/Bloomberg

March 3 (Bloomberg) -- Redemptions from Bill Gross’s Pimco Total Return Fund slowed to a 10-month low in February, the first month after the resignation of Chief Executive Officer Mohamed El-Erian.

Investors pulled a net $1.6 billion from Pimco Total Return Fund in February, the least since May, according to an e-mailed statement from Pacific Investment Management Co. Net redemptions have decreased this year from the fund, which lost its title as the world’s largest mutual fund in October.

Withdrawals slowed at Newport Beach, California-based Pimco despite a leadership shakeup triggered by the resignation of El-Erian, who shared the role of chief investment officer with Gross and was considered his heir apparent. Gross appointed six deputy investment chiefs after El-Erian on Jan. 21 announced he would be leaving in mid-March.

Pimco Total Return, which is the firm’s largest fund and accounted for about 12 percent of its $1.9 trillion in assets as of Dec. 31, has stemmed the rate of withdrawals as investors returned to fixed-income strategies last month. Bond mutual funds attracted $2.9 billion in the week ended Feb. 19, the most since the week ended May 22, according to Washington-based Investment Company Institute. Investors started fleeing bonds in May after then Federal Reserve Chairman Ben S. Bernanke talked about reducing its unprecedented asset purchases.

Record Redemptions

The $31.4 billion DoubleLine Total Return Bond Fund run by Jeffrey Gundlach had its first month of net deposits since May, with clients putting $252 million into the institutional share class of the fund, according to an e-mailed statement from the Los Angeles-based firm. Gundlach’s fund, which opened in April 2010, had its first month of redemptions ever in June.

Pimco Total Return suffered record net redemptions of $41.1 billion in 2013, based on data from research firm Morningstar Inc. Firmwide, Pimco is trying to reverse net mutual-fund redemptions of $30.4 billion in 2013, compared with net deposits of $62.7 billion in 2012. That’s the biggest drop among the 10 largest U.S. mutual-fund families when excluding unit sales, according to Morningstar.

This year through Feb. 28, Gross’s fund returned 1.9 percent, trailing 59 percent of peers. Over the past five years, the fund returned 7.4 percent, beating 60 percent of rivals, according to data compiled by Bloomberg. In 2013, Pimco Total Return fell 1.9 percent, behind 65 percent of peers, while beating the Barclays U.S. Aggregate Index.

Gross said in an interview Jan. 22 that he was “shocked” and “discouraged” by El-Erian’s decision to leave. He named his deputy investment chiefs to highlight the depth and breadth of Pimco’s talent. Doug Hodge, formerly Pimco’s chief operating officer, was named its CEO. A few weeks later, as he sought to reassure clients, Gross said the new organizational structure following El-Erian’s resignation is a “significant improvement” and the investment officers will have more operational flexibility and discretion.

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

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net

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