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PIMCO: 16 Months Of Straight Decline In Assets

September 04, 2014 | About:

Bill Gross, the co-founder and chief investment officer of Pacific Investment Managment Company, Total Return Fund, has been having a lagging fund performance compounded by the out of the blue departure of earlier this year of Chief Executive Mohamed El-Erian. PIMCO's Bill Gross has some massive challenges on his hands from the lagging performance to 16 months of straight decline in assets for PIMCO. Clients of PIMCO has pulled $70 billion net cash out of the fund from April 2013 through August 2014. The 16 straight month of outflows has chipped away at the assets under management, down to $1.97 trillion.

Total Return Fund Outflows and Inflows

PIMCO Total Return Fund (PTTRX)

The Total Return Fund assets fell to $221.61 billion at the end of August, compared with $223 billion at the end of July. PIMCO's Total Return Fund's size has dropped every month after hitting a peak of $292.9 billion in April 2013. Since the peak to August 2014, the fund assets have dropped 24%. The fund is still the largest bond fund by assets in the world. PIMCO's persistent outflows have come even as investors are piling into bond funds broadly this year. Total Return Fund has delivered mix performances as of late. The fund posted a positive return of 1.11% in August, surpassing 77% of its peers, but it up 4.3% for year as of Friday. Based on its return for the year so far, the fund is trailing its peers. The fund has maintained a long term track record, averaging over the last 15 years annualized returns of 6.8%. Over the last 15 years PIMCO's Total Return Fund (PTTRX) has outperformed 96% of its peers.

PIMCO Total Return exchange traded fund (BOND)

PIMCO's actively managed ETF designed to mimic the strategy of the Total Return Fund, has had net inflows of $87 million in August. That is the third month of inflow for the Total Return ETF and no has assets of $3.6 billion at the end of August.

PIMCO'S outflows DoubleLine Total Return Bond Fund(DLTNX),(DBLTX) gain

One of PIMCO's top rivals Doubleline Capital had $477 million of net inflows in August and now has assets under management of $34 billion.

PIMCO's a few problems:

  • Bill Gross heir apparent Mohamed El-Erian has left the company.
  • PIMCO's has consistent net outflows over 16 months.
  • No heir apparent to take over the company when Bill Gross retires or dies.
  • Currently underperforming its peers.
  • The Coming end of the 30 year bond market bubble?
  • When or If PIMCO will put more of its assets into equities?
  • How will PIMCO deal when the bond market bubble pops?

Bill Gross talks about Mohamed El-Erian leaving the company on Bloomberg April 7 2014

The outflows will contine unless PIMCO's Total Returns during the rest of the year outperform its peers. PIMCO is a bond fund and bonds have been ralling for 30 years now. How much longer can the bond market rally for? It clear the bond market is in a bubble, its not clear when that bubble will pop. How will PIMCO and other bond funds do and deal when the bond market bubble pops?

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