Pimco Total Return Snaps Redemption Streak on Reinvestments

  • December's $1.3 billion inflow first positive month since 2013
  • Fund returned 0.7% and beat 87% of its peer group last year

Pimco Total Return Fund got a $1.3 billion inflow in December, ending a 31-month streak of net redemptions, as clients reinvested capital gains and dividends.

The $89.9 billion fund would have had an outflow without the reinvestments, Pacific Investment Management Co. said Tuesday.

Customers had pulled more than $200 billion since the fund’s peak in April 2013, withdrawals that surged after Pimco co-founder Bill Gross was ousted in September 2014. Outflows diminished in recent months as performance improved. Now co-managed by Scott Mather, Mihir Worah and Mark Kiesel, Total Return beat 87 percent of peers in 2015 by gaining 0.7 percent, according to data compiled by Bloomberg. Total Return made winning bets on consumer-related debt, such as U.S. housing, and dodged losses in energy, high yield and emerging markets.

“If there were lingering doubts about the investment platform, about what we can deliver, I think we answered to that over the last year,” Mather said today in a telephone interview. “People should continue to expect what they’ve seen from us for decades.”

It was the first time since 2012 the Total Return fund outperformed the majority of its Bloomberg peer group. It ranked in the 44th percentile of peers in 2014, the 34th in 2013 and the 92nd in 2012.

The Pimco Income Fund, co-managed by Daniel Ivascyn and Alfred Murata, added $14.4 billion in all of 2015. The Income fund rose 2.6 percent and beat 98 percent of peers thanks to stakes in mortgage-backed securities, especially those without government backing, and high-yield corporate debt with low default risks.

Smaller Outflows

Total Return, founded in 1987, had assets of $293 billion more than 2 1/2 years ago, when it ranked as the world’s largest mutual fund. Redemptions began with the so-called Taper Tantrum, when bondholders feared the Federal Reserve was reducing U.S. economic stimulus, and accelerated amid management turmoil at the Newport Beach, California-based firm. Outflows peaked at $27.5 billion in October 2014 after Gross jumped to Janus Capital Group Inc. to manage the now-$1.3 billion Janus Global Unconstrained Bond Fund.

Total Return’s outflows have been shrinking both in dollar terms and on a percentage basis. Investors pulled $1.5 billion in November, or less than 2 percent of the assets, the smallest withdrawal since Gross left the firm. In December 2014, the fund reported $19.4 billion in redemptions, or more than 10 percent even after reinvested dividends.

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