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Outflows Drag PIMCO Total Return Fund Assets Below $100B

Not too long ago, Pacific Investment Management Company (PIMCO) lost the crown of having the world’s largest mutual fund. Now, its flagship product PIMCO Total Return A (PTTAX) fund’s assets under management has dropped to an eight year low.

PIMCO Total Return hit a peak of $293 billion in assets under management in April 2013. It was the world’s largest mutual fund at that time. However, this Investment Grade Bond – Intermediate fund is now a shadow of its past. Following 28 straight months of outflows, PIMCO Total Return fund’s assets under management dropped below $100 billion in August. The PIMCO fund thus saw below $100 billion in assets for the first time since January 2007.

During the peak in April 2013, the fund was managed by bond investor extraordinaire William Hunt "Bill" Gross. Co-founder of PIMCO, Bill Gross, in a shocking move exited PIMCO to join Janus Capital Group (JNS) last year in late September. This move was shocking, but it was correctly predicted then that a number of PIMCO clients would follow Gross to Janus.

By November of last year, Gross’ new Janus fund had attracted significant inflows, but even that momentum has receded. A trend we have been noticing is funds shifting to Passive side after exiting the Active funds.

PIMCO’s Asset Drop

PIMCO Total Return Fund lost $1.8 billion in assets in Augus, which brought its outflow streak to 28 weeks. This also follows $2.5 billion of outflow in July. Assets were thus down to $98.5 billion as of Aug 31, dropping below $100 billion for the first time in over eight years. According to Morningstar, PIMCO Total Return fund’s assets were $99.86 billion in Jan 2007.

Separately, Morningstar data released last month revealed that PIMCO’s total outflows since Jan 2014 reached $212.8 billion in Jul 2015. This meant a 40% decline in assets. The only bright spot has been the inflows in PIMCO Income A (PONAX). This Diversified Bond fund saw inflows of $9.9 billion since Sep 2014, according to Morningstar. As of August end, it has $50 billion in assets under management. PONAX currently carries a Zacks Mutual Fund Rank #2 (Buy) and has returned 2.3% year to date.

However, the inflows into PIMCO Income are negligible compared to the outflows the PIMCO Total Return fund has witnessed. Since Sep 2014, PIMCO Total Return has lost $122.5 billion up until July; and the outflows continued in August. Outflows in January were a staggering $11.6 billion.

Bill Gross’ Exit in September

Bill Gross left PIMCO in September 2014 after a four-decade stay and joined the relatively smaller Janus. Gross moved in order to manage Janus Global Unconstrained Bond A (JUCAX), which had only $12.9 million worth of assets under management then.