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PIMCO’s Q3 Outflows Top 5% of Assets

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PIMCO’s assets under management fell 5.17% in the third quarter, according to figures the firm released Friday. As of Sept. 30, the fixed-income shop had $1.876 trillion in AUM vs. $1.973 trillion on June 30, which represents a drop of $97 billion.

“Changes in AUM are a function of a number of factors, including portfolio returns, currency changes and net client flows,” PIMCO said in a statement. Its various funds had “a range of returns and client flows for the quarter.”

On Oct. 1, PIMCO said net outflows from the Total Return Fund, formerly managed by Bill Gross—who left the firm abruptly in late September to join rival Janus Capital Group—were an estimated $23.5 billion. “Of note,” the company explained, “the largest daily outflow occurred on the day of Bill Gross’ resignation from the firm, while outflows on the two following days were considerably smaller.” Recently, Jeff Tjornhoj, head of research for Lipper-Americas, gave his view on Gross’ departure from PIMCO, calling it “the biggest news for bond funds [in] this past quarter” and attributing the move to “internal strife with executive management [that] grew too distracting for either side to bear.”

Gross left “before he could be fired,” Tjornhoj explained. “It was a watershed moment for the fund industry to see a titan such as Bill Gross lose control of one of the largest mutual funds in the world. We’ll be curious to see how the next chapter of his career evolves at Janus.”

Meanwhile, PIMCO says investors are “showing confidence in PIMCO,” as demonstrated by the roughly $6.5 billion that has moved into the PIMCO Income Fund.

Last week, Morningstar said it “still likes” the Total Return Fund, despite its continued spate of outflows. The research group downgraded its rating on the fund to bronze from gold following Gross’ career move.

“The underlying material that has driven the [Total Return] fund is still there,” said Eric Jacobson, senior analyst of active strategies, on a Wednesday conference call.

John Hale, Morningstar’s director of manager research for North America, added that while the Total Return Fund has seen “significant outflows,” PIMCO has “sufficient liquidity” to handle those outflows—at least in the short-term.

Fixed-Income Funds

Investors pumped $50.7 billion into money-market funds in the third quarter, according to the estimates provided by Lipper on Tuesday. However, they also showed a diverse appetite for both fixed-income and equity products.

Third-quarter estimated fund flows into traditional mutual funds (excluding money markets) were $25.5 billion, with investors focusing on taxable fixed-income products ($21.1 billion) and municipal debt ($5.8 billion). ETF inflows hit $31.8 billion and moved mainly into equity products to the tune of $28.1 billion.

In Lipper’s analysis of the Q3 winners and losers, released Tuesday, the group says institutional U.S. Treasury money-market funds drew nearly $29 billion of inflows, while international U.S. government money-markets brought in about $19 billion. Core-bond funds had inflows of $10.5 billion. Other leading categories with inflows were international multi-cap core ($8.6 billion) and multi-cap core ($7 billion).

Losing categories for the past three months included high yield (-$17.4 billion), loan participation (-$8.4 billion), large-cap growth (-$7 billion), multi-cap growth ($-5 billion) and small-cap growth (-$4.5 billion).

As for performance, equity funds fell 2.92% in the third quarter—their first quarterly loss over the past nine three-month periods.

U.S. diversified-equity funds dropped 1.95%, and mixed-assets funds fell about 1.71%. Sector-equity funds, though, declined nearly 4%, as world-equity products dipped close to 4.4%. Year to date, equity funds are still up 2.5% through Sept. 30, the research group says.

During the third quarter, Lipper notes, the U.S. dollar moved up almost 5.5% vs. the British pound and some 8.5% compared with the euro. Gold priced dropped nearly 8.5% in the period, while oil fell some 13.5%. 


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