After star money manager Bill Gross left in 2014, Pacific Investment Management Co. seemed destined to fade from prominence and become just one of the many firms that dot the U.S. bond-industry landscape. But then Dan Ivascyn, the man tapped to replace Gross, got hot.
Real hot.
Almost no comparable fund in the country has matched the return of his Pimco Income Fund over the past three and five years. "It's performed exceptionally well, even shockingly well, over all periods," said Michael Rosen, the chief investment officer for Angeles Investment Advisors and a Pimco Income Fund client.
The fund returned 10.6 percent in the past 12 months alone and investor money is now pouring in at a pace unseen by any other actively-managed stock or bond fund, according to data compiled by Bloomberg and Morningstar Inc.
Having swelled at the end of February to $75.4 billion, the fund reached a symbolic milestone: It overtook the old Gross-run fund that was once the world's largest, the Pimco Total Return Fund. Its assets have steadily declined since Gross's exit and now stand at $74.2 billion.
Investors pulled another $1 billion from Total Return in February while adding about $2 billion in new money to the Income Fund, according to Bloomberg estimates.
To be sure, Ivascyn was already posting outsize returns prior to Gross's departure — that's part of the reason he was named to replace him — but his touch has been especially deft of late.
Alongside his Income Fund co-manager Alfred Murata, Ivascyn seized opportunities last year while others retreated.
One example: They added subprime mortgage bonds, most of which were issued before the housing crash, after hedge funds were forced to sell at low prices to meet redemptions. They also snapped up riskier corporate and foreign bonds following the oil price plunge in February, the British vote to exit the European Union and the election of Donald Trump.
Before the November election, Ivascyn cut back on U.S. Treasury holdings, which he expected would fall in value as the economy improved and interest rates rose. After Trump's surprise victory sparked a surge in rates and drop in bond prices, he reloaded on longer-term debt that has subsequently risen in value as bond yields dipped.
The fund returned 2.75 percent since Nov. 8 compared with a 1.8 percent loss for the Bloomberg Barclays U.S. intermediate-term bond aggregate.
"You had three events where markets overreacted to some degree and you were able to take advantage of some attractive valuations," Ivascyn said at his Newport Beach, California headquarters, overlooking a yacht marina. "This year, when there's not a whole lot of fear in the market, you sit back and be patient."
