Retirement plan advisers set to flee Pimco after Gross exit

Tue Sep 30, 2014 1:28am EDT
 
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By Jessica Toonkel

(Reuters) - Bill Gross's sudden departure from Pimco and the Total Return Fund he ran for 27 years was the last straw for Jim Phillips, president of Retirement Resources, a Peabody, Massachusetts-based firm that advises 401(k) plans with $50 million to $100 million in assets. He's advising clients to head for the exits.

After 16 straight months of outflows and a 3.49 percent return over the past year, worse than 75 percent of its peers, the $222 billion Total Return Fund PMBIX.O is failing Phillip's standards when it comes to meeting the retirement needs of his customers.

"We do not have ongoing confidence in the way the fund is being managed," Phillips said. "We are recommending to clients that we replace this fund with another one."

Philips said he joined a conference call Monday with Pimco chief executive Doug Hodge and some of the company's portfolio managers, but said the conversation "doesn't change any actions that we have planned."

About 27,000 of the largest corporate 401(k) plans in the country had money in the Total Return Fund as of the end of 2012, according to the most recent data from BrightScope, which ranks retirement plans. The roster includes Wal-Mart's $18 billion plan, the largest in the country by assets, as well as Raytheon's and Verizon's.

Total Return holds $88.3 billion of the $3 trillion in 401(k) assets listed in BrightScope's database of more than 50,000 of the largest plans, the biggest mutual fund in the database.

Wal-Mart didn't return calls and Raytheon and Verizon declined to comment for this article.

Phillips isn't alone in his dissatisfaction with the fund – investors have pulled $25 billion from Total Return Fund so far this year. But a bad year that began with a public falling out between Gross and top deputy Mohamed El-Erian in January and has now seen the Pimco co-founder quit is causing many 401(k) plan consultants and advisers to put the Total Return Fund on their watch lists, and in some cases start replacing it.   Continued...

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