- Rising returns tipped balance as mutual fund outflows waned
- Assets of $1.5 trillion are down about one-fourth from peak
Pacific Investment Management Co. had its first increase in assets since mid-2014 in the first quarter as mutual fund redemptions ebbed and returns climbed.
Assets under management rose to $1.5 trillion from $1.43 trillion on Dec. 31, the first three-month gain since the second quarter of 2014, Pimco said Wednesday on its website. The change reflects net flows, performance and currency fluctuations.
Three factors have led investors to pull money from Pimco: management turmoil exacerbated by the September 2014 exit of co-founder Bill Gross, concerns that bond returns may weaken if interest rates rise and an industrywide shift to passively run funds.
“The confidence in that firm was shaken badly with all the negative headlines,” Terri Spath, chief investment officer of Sierra Investment Management, said in a telephone interview.
Spath, who oversees $2.3 billion for the Santa Monica, California-based firm, said she has been buying Pimco emerging-market and high-yield funds since February because the portfolio managers have better records than peers in those sectors.
“There’s still incredible depth of brainpower at their headquarters,” Spath said.
Assets at Newport Beach, California-based Pimco peaked at more than $2 trillion in the first quarter of 2013 and began to fall in May of that year during the so-called taper tantrum, when investors feared interest rates would rise as the Federal Reserve signaled it was ready to reduce stimulus measures. Redemptions surged in the third and fourth quarters of 2014, when Gross, the chief investment officer and manager of the Pimco Total Return Fund, made an acrimonious departure from the firm.
In addition to mutual funds and ETFs, Pimco manages separate accounts that don’t disclose flows.
Investors pulled about $3.5 billion from the Pimco Total Return Fund, according to Bloomberg estimates. Assets held by the investment vehicle, formerly the world’s largest mutual fund, fell to $88 billion at the end of March from an April 2013 peak of $293 billion. The fund was up 2 percent this year through Tuesday, lagging behind 80 percent of its Bloomberg intermediate-term bond peers.
Net redemptions from Pimco’s 118 mutual funds and ETFs totaled about $6.8 billion, or 2.3 percent of assets, during the quarter, according to Bloomberg estimates. Investors added about $3 billion to the Pimco Income Fund, $2 billion to the Pimco High Yield Fund and $1 billion to the Pimco Investment Grade Corporate Bond Fund, the estimates show.
“Pimco saw inflows into more than 40 funds during March, across strategies as varied as income, investment grade credit, high yield, mortgages and munis,” spokesman Michael Reid said in an e-mail.
Bloomberg estimates for fund flows are based on the change in assets over the quarter that isn’t accounted for by performance or reinvested dividends. The number may vary from actual figures and from estimates compiled by other data providers.