Pimco Total Return Fund posts a record $27.5 billion in outflows in October

Tue Nov 4, 2014 6:01pm EST
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By Jennifer Ablan

NEW YORK (Reuters) - Pacific Investment Management Co suffered a record $27.5 billion in withdrawals from its flagship Pimco Total Return Fund in October, extending large net outflows following Bill Gross' surprise resignation from the firm.

The redemptions surpassed the $23.5 billion reported in September, according to a statement on Tuesday from Newport Beach, California-based Pimco. Its main fund, the world’s biggest bond mutual fund, now has $170.9 billion in assets, down from a peak of $293 billion in 2013.

Gross, who managed the Pimco Total Return Fund and co-founded the firm over 40 years ago, resigned on Sept. 26 to join rival Janus Capital Group Inc (JNS.N: Quote).

Pimco - which had assets under management of $1.876 trillion as of Sept. 30, representing a 5 percent drop in the third quarter - has been aggressively reassuring clients through meetings, conference calls and advertisements that the firm remains committed to the same investment strategies following Gross' exit.

"With Bill's recent decision to resign, the perception has been that there has been a dramatic shift at Pimco," Pimco CEO Doug Hodge said in a letter to clients last month. "However, the reality is that while Pimco has evolved into a globally diversified investment company, our DNA is fundamentally unchanged."

Gross' exit, eight months after his top deputy, Mohamed El-Erian, quit amid acrimony, has quickened speculation in the bond market about leadership stability and further outflows into the new year.

Pimco said outflows from the Pimco Total Return fund slowed considerably during the month of October, with nearly half of the $27.5 billion of outflows occurring in the first five trading days.

"Unfortunately, new management will need to convince shareholders that the process has not changed but performance has improved," said Todd Rosenbluth, S&P Capital IQ's director of mutual fund and ETF research. "But many investors viewed the Gross departure as reason to reconsider investing in Pimco Total Return. For many, the review process takes time, so outflows could persist as investors identify other funds with stronger records under current management."   Continued...

An undated handout photo of Pimco's headquarters in Newport Beach, California. REUTERS/Pimco/Handout