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PIMCO Funds Down, Not Out (Yet): Morningstar

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The latest news for the PIMCO Total Return Fund (PTTRX) isn’t great. But the troubled fund family — which continues to experience significant outflows — “is not ready to be written off just yet,” according to senior analyst Alina Lamy of Morningstar, in a report issued Tuesday.

Fund Flows

The fund had outflows of about $6.3 billion in April, says the fund research group. “Although this was still an outflow, it was the fund’s smallest since [founder Bill] Gross left the firm,” Lamy explained.

Still, another month of redemptions brought PIMCO’s total losses to $193.6 billion since January 2014, a 37% decrease in assets. “Outflows from PIMCO Total Return alone amounted to $113.3 billion in the space of eight months,” the research expert said.

Overall PIMCO funds had outflows of $7.4 billion in April and $42.3 billion so far in 2015. The flagship Total Return fund has had net outflows of nearly $127 billion in the past year.

In the 12-month period ending April 30, Morningstar estimates the Newport Beach, Calif.-based group — which recently added ex-Fed Chairman Ben Bernanke as a senior advisor — has seen its total assets under management drop from $523 billion a year earlier to roughly $355 billion. That represents a decline in overall fund market share of 1.5% — from about 4% to 2.5% today.

For its part, PIMCO says the April outflows from the Total Return Fund were slightly less than Morningstar’s estimates: $5.6 billion. “The fund had $110.4 billion of assets at the end of the month,” the company said in a statement earlier this month.

“Year-to-date through April, the fund delivered a net after-fee return of 1.62%, outperforming its benchmark by 38 basis points and generating excess returns of 30 basis points above the Morningstar Intermediate Term Bond Average,” the firm added.

Morningstar, however, points out that the fund lagged its benchmark, the Barclays U.S. Aggregate Bond Index, in April. Furthermore, the fund’s return from Sept. 27, 2014 (a day after Gross left) to April 30, 2015, was 3.0%, “below the 3.1% return of the aggregate index,” the research firm points out.

The PIMCO flagship fund was up 4.69% in 2014 vs. 5.97% for the index and 5.18% for the intermediate-bond category. In the past eight months, outflows from PIMCO Total Return amounted to $113.3 billion.

On a trailing-12-month basis, the fund’s one-year total return was 1.89% as of Tuesday vs. 2.77% for the aggregate index and 2.18% for the intermediate-bond category. In addition, as of May 19, its year-to-date performance is 0.18% behind its index (0.31%) and its category average (0.54%), when calculated on a trailing-12-month basis, according to Morningstar data.

On the bright side, though, “PIMCO landed a fund in the top-flowing five for the second consecutive month,” explained Lamy.

The PIMCO Income Fund (PONAX) has estimated inflows of $909 million in April. For the past 12 months, inflows are nearing $9 billion. The active fund has close to $45 billion in assets, Morningstar says, up from about $34 billion a year ago. 

— Check out Bill Gross: Still the Bond King—The 2015 IA 35 for 35 on ThinkAdvisor.


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