Exclusive: Schwab drops Pimco Total Return from target date portfolios

Thu Oct 2, 2014 5:27pm EDT
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By Jessica Toonkel

(Reuters) - Charles Schwab Corp (SCHW.N: Quote) has dropped the Pimco Total Return Fund from its 10 target date funds and collective trusts, a company spokeswoman told Reuters on Thursday.

The firm completed its review of the fund this week on the heels of the announcement last Friday that Bill Gross, Pimco co-founder and manager of the fund, was leaving to join Janus Capital Group (JNS.N: Quote).

The retail target date funds have $2.9 billion in assets - $141 million of which had been in the Pimco Total Return Fund.

Schwab is looking for a replacement for the Pimco fund and has temporarily reallocated the Pimco assets into the Schwab Total Bond Market Fund SWLBX.O and the Loomis Sayles Investment Grade Bond Fund LIGRX.O, the spokeswoman said.

In its collective trusts, which are institutional versions of the retail funds and are designed for large 401(k) plans, Schwab began reducing its allocation to the Pimco fund in September and hired Wells Fargo (WFC.N: Quote)'s asset management arm as an additional subadviser.

Schwab will reallocate the Pimco assets among its different strategies in the portfolios until it finds a permanent replacement for Pimco, the spokeswoman said. It could not immediately be determined how much in assets is in the collective trust, but it totals billions of dollars.

A Pimco spokesman was not immediately available to comment.

Target date funds - portfolios that adjust their allocations based on a target retirement date and become more conservative by shifting more assets from equities into fixed income over time - are in over 72 percent of 401(k) plans, according to San Francisco-based retirement plan consultant Callan Associates.   Continued...

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