A change in how Pacific Investment Management Co. accounts for reinvested dividends and capital gains helped the bond manager minimize an exodus of clients by about $18 billion last year.
PIMCO at the start of 2015 began counting such payouts as inflows, a departure from the way it used to report flows. The change, made as the Newport Beach, California-based firm was under pressure to stem a flood of redemptions following the departure of co-founder Bill Gross, has put a spotlight on a controversial issue among money managers — what to count as new money.
Competitors including Vanguard Group, Fidelity Investments, DoubleLine Capital, Legg Mason Inc. and JPMorgan Chase & Co. all discount or exclude payouts that clients elect to leave in the funds. Others, such as BlackRock Inc., the world’s largest money manager, and Janus Capital Group Inc., Gross’s new employer, roll such reinvestments into net flows.
PIMCO is under pressure to reverse client withdrawals and cut expenses after losing about 30 percent of managed assets since they peaked at $2.04 trillion in 2013. The firm’s parent, German insurer Allianz SE, last week appointed Jacqueline Hunt to lead asset management, replacing Jay Ralph. Allianz Chief Executive Officer Oliver Baete said in February he expects PIMCO to see inflows by the end of the year.
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PIMCO said it had been considering the change long before Gross departed, to align its methodology with other parts of Munich-based Allianz.
“Given the need for consistency and greater clarity, PIMCO decided to implement the change at the most responsible time for any accounting change — the start of the new fiscal year,” spokesman Michael Reid said in an e-mailed response to questions. “While it’s true that PIMCO was under greater scrutiny from investors at that time, that made it all the more important to be consistent with the Allianz group in our approach.”
PIMCO had 16.6 billion euros of reinvested dividends and capital gains last year (equal to about $18 billion as of Dec. 31), Allianz said in a Feb. 19 presentation. Without that cash, PIMCO’s 125 billion euros in outflows would have been 141.6 billion euros, or 13 percent higher.