Pimco founder Bill Gross has long been seen as the “bond king." Pimco's Total Return Fund, which Gross leads a team in managing, is the world’s largest bond fund and a bellwether for traditional bond funds. Still, for the last 13 consecutive months, investors have been withdrawing money from it. The most recent data for May shows net outflows of $4.3 billion for the month, bringing total outflows to $59.6 billion since May of last year.
In an interview with The Daily Ticker, Gross admits the outflows concern them. As for reasons for the withdrawals, Gross points first to the Fed and, more specifically, to the dreaded anticipation of the central bank's "taper" of bond purchases, which started the outflow trend. “In the beginning it wasn’t just Pimco, it was Pimco, Black Rock and everybody else in terms of managing bonds [experiencing withdrawals]," he tells us. "People were all of a sudden discovering bonds could go down in price ... and so that I think explains the first five or six months.”
Then, earlier this year, came the departure of Pimco’s CEO and co-CIO Mohamed El-Erian and along with it plenty of bad press. Headlines read “Damage Control at Pimco After Gross, El-Erian Clash” and “At Gross’ Pimco, El-Erian Says ‘Different Styles’ Stopped Working Together.”
“Since January, obviously with some of the headlines, investors are probably concerned about the new Pimco,” Gross told Yahoo Finance. “How do we work without Mohamed? What is Gross gonna do? Is he happy? Is he sad?”
A new structure was put in place with several deputy CIOs working under Gross, acting as leaders and experts in a variety of industries and specialties. Gross says the new structure is working, and proof is in the numbers. "Although frequently quoted relative to high yield funds and other risk-taking funds with higher numbers, Pimco is still beating the market so to speak," he says. "That’s what we’ve done for 20 years.”
The fund gained 1.25 percent gain for the month of May, which beat 79 percent of peers and marked its best return since January, according to Morningstar data reported by Reuters. But the Pimco Total Return fund is up 3.32 percent for the year, trailing 78 percent of its peers.
Gross says he's confident that things will turn around.
Related: No, the bond market isn't a bubble
At 70 years old, the issues facing the firm won’t always be his problem. While El-Erian was seen as his heir apparent, the firm looks a lot different now. So who will be ready to take Gross's place? “We didn’t appoint the [deputy] CIOs with that in mind,” he says, “but legitimately you would think that if and when I did leave ... I don’t think we’d go outside ... The Pimco way is to generate it internally.”
Gross is careful to note, however, that such a move is not coming anytime soon. “My wife says I can never leave," he quips.
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