Pacific Investment Management Co. has lost its title as manager of the world’s largest emerging-market bond fund, battered by ill-timed bets that fueled an investor exodus.
Assets managed by Pimco Emerging Local Bond Fund have tumbled 62 percent, from an April 2013 peak, to $6 billion at the end of October. It was about $150 million smaller than an Ireland-incorporated fund run by Stone Harbor Investment Partners LP.
While few emerging-market funds have escaped losses as commodity prices fell and the strong U.S. dollar crushed developing-nation currencies, none has lost as much money as Pimco.
After attracting more assets than any of its rivals in the wake of the 2008 financial crisis, Pimco’s outsized investments in places such as Brazil left it trailing its benchmark. Power struggles at Pimco shook investors’ confidence further as former Chief Executive Officers Bill Gross and Mohamed El-Erian left the firm.
“Certainly performance at Pimco has been challenged in the last few years,” said Philip Schmitt, senior research analyst at consulting firm Verus Investments in Seattle. “People are voting with their feet,” he said, while adding that emerging-market funds overall have suffered from a strengthening dollar.
Agnes Crane, spokeswoman for Pimco, declined to comment on the drop in assets.
Pimco’s local bond fund, managed by Michael Gomez in Newport Beach, California, lost 25 percent in three years through Nov. 16 on a total return basis, compared with a 22 percent drop in JPMorgan Chase & Co.’s benchmark for emerging market bonds. The fund, which invests in local-currency bonds in developing nations, lagged 69 percent of its peers tracked by Bloomberg.
Stone Harbor’s Emerging Markets Local Currency Debt Fund also underperformed, losing 27 percent in three years. But it held onto investors better, according to Pablo Cisilino, who helps oversee the fund, losing 40 percent of assets since May 2013, to $6.2 billion. The fund had been as much as $6.7 billion smaller than Pimco’s.
“It has been tough for everybody in the industry,” said Cisilino. Stone Harbor, founded by Peter Wilby and his former Citigroup Asset Management team in 2006, specializes in emerging-market and high-yielding bonds.
JPMorgan’s gauge of emerging-market local-currency bonds rose 0.2 percent Tuesday, reducing its loss this year to 12.5 percent.
The rise and fall of the Pimco fund also reflects the broader boom and bust in emerging markets over the past six years.