By Min Zeng and Kirsten Grind
Investors pulled $4.5 billion from Bill Gross's Pimco Total
Return Fund in June, the 14th straight month of outflows from his
massive bond fund, despite returns that outpaced many rivals in the
second quarter.
June's outflow represents 2% of its assets at the end of May and
marks the biggest monthly outflow for the fund since September
2013, according to fund tracker Morningstar.
Assets in the flagship fund at Pacific Investment Management Co.
fell to $225.2 billion at the end of June, compared with $228.9
billion a month earlier. Asset numbers also take into account
performance of the fund, while flow numbers don't.
Total Return remains the world's biggest bond fund by assets.
Mr. Gross is co-founder and chief investment officer at Pimco,
which manages $1.94 trillion in global assets as part of Germany's
Allianz SE.
A spokesman for Pimco said Wednesday the firm doesn't comment on
specific fund flows.
In a statement, the spokesman said, "Patient investors are
rewarded over the long-term by sticking with core bond allocations
in a diversified portfolio. The PIMCO Total Return fund has
outperformed its benchmark and a majority of its peers over the
last 1, 3, 5, 10 and 15 years."
The Pimco fund continued to shrink even as the bond fund
industry overall has seen new cash flowing in. U.S.-listed bond
mutual funds and exchange-traded funds attracted $8.6 billion in
new cash in June, bringing the inflow this year to $76.5 billion,
according to fund tracker TrimTabs Investment Research.
DoubleLine Total Return Bond Fund at DoubleLine Capital, one of
the Pimco fund's main rivals, attracted $515 million inflow in June
and the fund's asset size was $33 billion at the end of last month,
according to Morningstar.
The latest outflow from Mr. Gross's fund suggests many investors
remain cautious over the Newport Beach, Calif., money manager
following a turbulent shakeup of top management in the first
quarter along with lagging fund performance and record outflows in
2013.
Investors have kept a close eye on Pimco since Mohamed El-Erian,
groomed by Mr. Gross as a possible successor, quit as chief
executive and co-chief investment officer earlier this year. The
Wall Street Journal reported in February that Messrs. Gross and
El-Erian had clashed openly.
"The convergence of management issues and poor performance was
the double-whammy that caused persistent outflows," said Jeff
Tjornehoj, head of Lipper Americas Research.
Mr. Tjornehoj said it is "too early to signal a turnaround" for
the fund even with the strong second-quarter return.
Mr. Gross's fund posted a total return of 2.37% between April
and June, compared with a return of 2.04% from its benchmark the
Barclays U.S. Aggregate Bond Index, according to Morningstar. The
fund outpaced 77% of its rivals. Total return includes bond price
appreciation and interest payments.
The fund remains a laggard this year. Its 3.5% return through
Tuesday trailed 71% of its peers, according to Morningstar.
For Mr. Gross to turn the tide of outflows, "It would probably
be good if the fund showed multiple quarters of outperformance,"
said Matt Reiner, chief investment officer at Capital Investment
Advisors in Atlanta, which has $1.3 billion in assets, including
$30 million in the Pimco Total Return Fund.
The Pimco fund's size has tumbled from a record high of $292.9
billion in April 2013, one month before investors started to pull
out cash. Clients have yanked about $64 billion net cash between
last month and May 2013.
Mr. Gross's fund maintains a solid long-term track record. Its
annualized average return over the past 15 years through Tuesday
was 6.8%, beating 96% of its peers.
Write to Min Zeng at min.zeng@wsj.com and Kirsten Grind at
kirsten.grind@wsj.com
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