By Dan Fitzpatrick
Vanguard Group will have to wait at least another month before
it can claim the world's largest bond mutual fund.
A Vanguard fund managed by Joshua Barrickman is $1 billion away
from surpassing Pacific Investment Management Co.'s Total Return
fund after clients pulled $7.3 billion from Pimco's flagship
product in March, according to data released Thursday by both money
managers.
Total Return ended March with $117.4 billion in assets as
compared with $116.4 billion for the Vanguard Total Bond Market
Index fund, excluding an ETF share class. Pimco's Total Return
became the industry's largest by assets in 1997.
Vanguard's competition for the throne marks a significant
turning point for the industry as investors flock to plain-vanilla
funds that follow market indexes rather than relying on star
managers to pick winners. Vanguard, based in Malvern, Pa., is known
for its hands-off approach to investing.
Pimco, based in Newport Beach, Calif., has been scrambling to
keep clients following a tumultuous 2014 and the acrimonious
departure of star Total Return manager Bill Gross at the end of
September. The fund is now down 60% from its peak of $293 billion
in April 2013.
The exit of $7.3 billion in March was the lowest since Mr.
Gross's departure, but it marked the 23rd consecutive month of
withdrawals from Total Return.
No one in the bond world has benefited more from this shift than
Mr. Barrickman, a reserved and soft-spoken manager who oversees the
Vanguard Total Bond Market Index fund and is the opposite in many
ways of Mr. Gross, who now runs another bond fund for rival Janus
Capital Group Inc.
While Mr. Gross is a regular fixture on financial television and
well-known for his long monthly letters to investors discussing
everything from his dead cat to his body fat, Mr. Barrickman
doesn't often communicate with his clients or the outside world.
His desk is the same size as his colleagues, while Mr. Gross
operated from a desk at Pimco that was among the largest on the
trading floor.
Mr. Barrickman's fund won the unprecedented scramble for cash
that followed Mr. Gross's surprise exit without any advertising or
sales pitches. His fund, which tracks a version of the Barclays
U.S. Aggregate Bond Index, gained nearly $15 billion in client
commitments during 2014 while Pimco Total Return lost roughly $103
billion, according to fund research firm Morningstar Inc.
Outflows from the Total Return fund are expected to vary from
month to month, but in early December one of three new Total Return
managers said the firm had moved past the "knee-jerk reaction in
terms of flows that you would expect to happen."
The slowdown in withdrawals during March came as Total Return
posted strong performance compared with rivals. The fund earned a
return of 2.22% after fees for the year to date through the end of
March and 3.56% for the six months ending March 31, beating the
Morningstar Intermediate Term Bond Average and the company's
internal benchmarks.
Write to Dan Fitzpatrick at dan.fitzpatrick@wsj.com
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