Pimco Total Return has record $41.1 billion outflow in 2013: Morningstar

Fri Jan 3, 2014 5:07pm EST
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By Sam Forgione

NEW YORK (Reuters) - The Pimco Total Return Fund, the world's largest bond fund, saw its assets sink by a record $41.1 billion last year after a mistaken bet on U.S. Treasuries resulted in the fund's worst annual performance in nearly two decades.

Investors pulled $4.2 billion from the fund in December, marking the eighth straight month of outflows and reducing the fund's assets to $237 billion. The fund fell 1.9 percent last year, marking its first annual loss since 1999 and its worst performance since 1994, according to preliminary Morningstar data.

Pimco had outflows of $10.4 billion across all of the its U.S. open-end mutual funds in December, resulting in outflows of $31.1 billion for the year. That marked the first annual outflows from those funds since Morningstar began tracking them in 1993.

The fund's status is closely watched because Pimco, a unit of European financial services company Allianz SE (ALVG.DE: Quote), is one of the world's largest bond managers and had $1.97 trillion in assets as of September 30, 2013, according to the firm's website.

Investors also pulled $147 million from the Pimco Total Return Exchange-Traded Fund (BOND.P: Quote) in December, and the ETF saw net outflows totaling $197 million in 2013, Morningstar data showed on Friday.

The ETF, which is actively-managed and designed to mimic the strategy of the mutual fund, fell 0.85 percent in December, marking the worst performance among its peers, according to preliminary Morningstar data. For the year, the ETF fell 1.2 percent but still beat 80 percent of peers.

The Pimco Total Return Fund had a large holding in Treasuries last year when Federal Reserve Chairman Ben Bernanke told Congress on May 22 that the central bank could reduce its $85 billion in monthly bond-buying stimulus later in the year, which triggered a selloff in Treasuries and other bonds.

"They were on the wrong side of the direction of U.S. interest rates," said Todd Rosenbluth, director of mutual fund research at S&P Capital IQ.   Continued...

The headquarters of investment firm PIMCO is shown in this photo taken in Newport Beach, California January 26, 2012. PIMCO/GROSS REUTERS/Lori Shepler