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Better Times Ahead for Pimco Total Return?

January 6, 2015

Bond-fund giant Pimco’s signature Total Return Fund keeps bleeding assets — more than $19 billion last month alone. But the outflow that started after its former lead manager, Bill Gross, left for rival Janus Capital in September is slowing, according to The Wall Street Journal.

It’s not just Total Return that’s feeling the impact of Gross’s departure. To be sure, it lost slightly more than $85 billion from January through November 2014; but at least 13 other Pimco bond funds had net outflows of $1 billion or more each during the period, fund-watcher Lipper tells FA-IQ.

Perhaps more worrying to advisors with Pimco bond funds in client accounts, leading competitors didn’t experience the same asset swoons. Lipper says a host of rivals from the likes of JPMorgan, DoubleLine, Fidelity and Vanguard each recorded multibillion-dollar net inflows last year. Furthermore, Lipper figures Total Return underperformed its average peer, 4.69% to 5.22%, in 2014.

Yet many FAs see the recent exodus as a contrarian indicator, Lipper analyst Jeff Tjornehoj tells FA-IQ. “They’re thinking this might be a good time to get back into Pimco funds like Total Return that’ve been strong long-term performers,” he says.

These advisors think fewer assets will give Pimco’s managers more room to maneuver. In other words, says Tjornehoj, portfolios with less “deadweight” let managers focus on their strongest picks.

Greg Peterson, a principal at Ballentine Partners in Waltham, Mass., offers his clients another view. Even after losing more than 50% of its assets since 2013 — at $140 billion-plus, Total Return hasn’t lost its market clout, he points out. “We still have faith in Pimco,” Peterson says. “They’ve got a deep bench of experienced and talented managers.”

By Murray Coleman
  • To read the Wall Street Journal article cited in this story, click here if you have a paid subscription.