Bill Gross's Pimco Total Return Fund Assets Drop Again

By Dow Jones Business News, 
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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'sAllianz 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

Subscribe to WSJ: http://online.wsj.com?mod=djnwires


  (END) Dow Jones Newswires
  07-02-141202ET
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