Pimco Bucks Trend by Raising Fees on Ivascyn’s Income FundBy
Firm cites dividend management at growing, $92 billion fund
Increase comes as large money managers compete on low cost
Pimco Income Fund, the fastest-growing actively managed U.S. mutual fund, is raising fees at a time most money managers are racing to slash costs paid by investors.
The $92 billion fund will increase its fees 5 cents per $100 on Oct. 2 for most share classes, according to a filing Thursday, bringing expenses for the institutional-class shares to 50 cents per $100. The change in supervisory and administrative fees is attributed in part to the cost of managing dividends for the growing fund, which has about 5,500 securities in numerous countries and currencies, said Pacific Investment Management Co. spokesman Michael Reid.
“Pimco Income Fund has delivered strong performance yet its total expense to investors remains lower than its peer group averages,” Reid said in an email. Pimco Income’s peer funds average fees are $1.01 per $100 in assets, according to data on the Morningstar Inc. website.
Investors have been moving money to low-fee, passively managed index funds, raising pressure on money managers to compete by reducing costs. Shareholders added a net $703.4 billion to passively run mutual and exchange-traded funds while withdrawing $214.5 billion from active funds in the 12 months through July, according to Morningstar.
The average fee paid by investors fell to 57 basis points in 2016 from 61 in 2015 and 65 three years earlier, according to a May report by Morningstar. A basis point is one-hundredth of a percent.
On the passive investing side, big providers such as BlackRock Inc., Vanguard Group, Fidelity Investments and Charles Schwab Corp. have cut fees on index funds and exchange-traded funds to as low as 3 or 4 cents for every $100 invested.
Pimco Chief Executive Officer Emmanuel Roman has said his firm’s strategy is to provide benchmark beating risk-adjusted returns through active management, while charging “the right level” of fees.
Pimco Income, managed by Dan Ivascyn and Alfred Murata, has added $23.5 billion in new investments in the past 12 months, more than any other actively managed U.S. fund,. Morningstar estimates. It has returned an average of 7.6 percent annually over the past five years, outperforming 99 percent of its Bloomberg peer group.
Pimco is increasing the Income Fund’s Class D fees 11 basis points, according to the filing. The firm is also boosting fees by 5 basis points for Class D shares of the All Asset Fund and the All Asset All Authority Fund.
At the same time, the firm is lowering fees 11 basis points across share classes on its Unconstrained Bond Fund and 5 basis points on its Emerging Markets Corporate Bond Fund, Emerging Markets Full Spectrum Bond Fund and Global Advantage Strategy Bond Fund. For the Pimco Total Return Fund, fees are being cut 5 basis points on Class A shares and increased 5 basis points on Class D shares.
— With assistance by Charles Stein