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Billions pour into rivals of Pimco Total Return Fund

Bill Gross
After clashing with other Pimco executives, Bill Gross quit in late September to run the Janus Unconstrained fund.
(Andrew Harrer / Bloomberg)

Investors poured billions of dollars during October into smaller rivals of Pacific Investment Management Co.'s Total Return Fund, the mutual fund once overseen by longtime bond guru Bill Gross.

Pimco Total Return, which Gross created and managed until abruptly quitting the Newport Beach company in late September, wasn’t expected to disclose its fund status until Tuesday or Wednesday.

But the flood of money into other funds indicated that the outflow from Pimco Total Return that began last year and rose this September continued last month.

As of Sept. 30, investors had pulled $46.3 billion out of Pimco Total Return since October of last year. The 19% decline left $201.6 billion in the fund, according to Morningstar Inc. analysts.

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The contrast was sharp with MetWest Total Return Bond Fund, run by Metropolitan West Asset Management in Los Angeles, where assets grew more than 57% to $40.5 billion from $25.7 billion over the last 12 months. Nearly $7 billion of the increase occurred last month, Morningstar calculated.

The MetWest fund, started in 1996 by Pimco alumni Tad Rivelle, Stephen Kane and Laird Landmann, attributed its recent success in part to team play by the leaders, in contrast to what had been a star-driven style at Pimco during Gross’ more than 40-year tenure.

“We believe the strong flows into our fixed-income funds are a result of our team approach, heritage of that team and outstanding performance,” said MetWest, now part of Los Angeles investment powerhouse TCW Group Inc.

Assets also flowed into the 13 mutual funds at DoubleLine Capital in Los Angeles, the 5-year-old investment firm started by another bond-trading star, Jeffrey Gundlach. DoubleLine said assets at the funds rose nearly $2.4 billion in October, bringing the total to $48 billion, with the DoubleLine Total Return Bond Fund gaining more than $1.8 billion.

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It was the biggest net gain of any month this year and the third best month ever for DoubleLine since it launched the funds in 2010, said Ron Redell, the funds’ president.

At giant BlackRock Inc., assets in its Total Return Fund had bumped along at just under $3 billion for a year before jumping to more than $4 billion in October, according to Morrningstar’s calculations.

The total-return funds are known in investment jargon as core-plus funds. These funds add investments with greater potential risks and returns, such as corporate junk bonds, distressed mortgage securities and the debt of emerging economies, to core holdings of investment-grade bonds.

Gross’ knack in adjusting the mix of such investments from the various bond desks at Pimco enabled him to beat the returns of rivals for decades before his record turned spotty the last few years.

That sent managers of large investment funds, including many entrusted with the retirement savings of millions of Americans, scurrying in search of substitutes.

The trend intensified when Pimco Chief Executive Mohamed El-Erian, an emerging-markets specialist who also had been co-investment chief at the company, resigned early this year amid reports that he had clashed with Gross.

Gross, 70, jumped ship Sept. 26 as reports emerged that disgruntled Pimco executives had planned to force him out of the firm he helped launch in 1971. He has taken the reins of a small bond fund at Janus Capital Group, which this week will disclose how much money he has attracted.

scott.reckard@latimes.com

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Twitter: @ScottReckard


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