Pimco Total Return loses title as world's largest mutual fund


By Sam Forgione

NEW YORK, Nov 4 (Reuters) - Bill Gross's Pimco Total ReturnFund had outflows of $4.4 billion in October, stripping it ofits status as the world's largest mutual fund on laggingperformance this year, data from Morningstar showed Monday.

The outflows marked the sixth straight month of withdrawalsfrom the fund, and lowered its assets to $248 billion, accordingto Morningstar data. For the year, the Pimco Total Return Fundhas had outflows of about $33.2 billion. The fund, which ismanaged by Pimco co-founder and co-chief investment officer BillGross, is still the world's largest bond fund, Morningstar said.

The Vanguard Total Stock Market Index now holdsthe title of world's largest mutual fund with $251.1 billion,according to Morningstar.

The status of Gross's fund is important because Pimcomanages roughly $1.97 trillion and is one of the world's largestbond managers. Gross's, and co-chief investment officer andchief executive Mohamed El-Erian's, views on global credit alsoinfluence other investors. Newport Beach, California-basedPacific Investment Management Co is a unit of European financialservices company Allianz SE.

Investors have continued to pull cash out of Gross'sflagship fund on fears interest rates will spike higher when theFederal Reserve scales back its stimulus, said Eric Jacobson,director of fixed income research at Morningstar.

Starting last May, bond interest rates shot higher onconcerns that the Fed would begin reducing its $85 billion inmonthly bond purchases. The yield on the benchmark 10-year U.S.Treasury note rose above 3 percent in September from 1.62percent in early May.

Morningstar's Jacobson, who has been covering Pimco for overa decade, said that investors have likely withdrawn cash fromGross's fund this year given the fund's stumbles in response tothose higher interest rates.

"Nobody's always going to be right on interest rate calls,but because he has been known for getting them right for a longtime, it's a 'live-by-the-sword, die-by-the-sword' kind ofproblem," said Jacobson.

The Pimco Total Return Fund rose 0.93 percent in October,beating 50 percent of peers, according to Morningstar data. Thatmarked its second straight month of gains after the Fed decidedto keep its bond-buying steady in September and October,sparking a rally in bond prices.

The fund stumbled in May, June, and August, however, andfor the year it is down 1.23 percent, beating 45 percent ofpeers.

Pimco is not alone in experiencing outflows. Bond fundsworldwide had outflows of roughly $9.2 billion in October,according to data from Bank of America Merrill Lynch and EPFRGlobal.

The Pimco Total Return Exchange-Traded Fund, anactively managed ETF designed to mimic the strategy of theflagship mutual fund, had $117 million in outflows last month,also marking its sixth straight month of outflows.

The ETF, which now has roughly $3.8 billion, rose 0.85percent in October, beating 77 percent of peers, according toMorningstar data. The ETF, which launched in February 2012, isdoing better for the year and is down 0.54 percent, beating 90percent of its peers, according to Morningstar.

Investors pulled $4.7 billion from all of Pimco's U.S.open-ended mutual funds last month, Morningstar said, markingthe fifth straight month of withdrawals from the firm.

Jeffrey Gundlach's DoubleLine Total Return Bond Fund, had $1.1 billion in outflows in October, marking itsfifth straight month of outflows and bringing this year'soutflows to $3.1 billion, according to Morningstar.

The outflows came as the fund rose 0.64 percent last month,ahead of just 14 percent of peers. For the year, the $34-billionfund is outperforming and is up 0.45 percent, beating 90 percentof its peers. DoubleLine had $1 billion in overall outflows fromits U.S. open-end mutual funds in October, also marking thefifth straight month of outflows from the firm, according toMorningstar.

Los Angeles-based DoubleLine Capital had $56 billion inassets as of June 30, according to the company's website.Gundlach is DoubleLine's chief executive and chief investmentofficer.

"The DoubleLine Total Return Bond Fund continues to share inthe net outflows that are being experienced by manyintermediate-term bond funds," said Loren Fleckenstein, analystat DoubleLine.

"We also see this phenomenon mirrored in net flows into theDoubleLine Low Duration Bond Fund because of fear of risinginterest rates."

The DoubleLine Low Duration Bond fund attracted$242.4 million in new cash in October, Morningstar data showed.

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