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Schwab dumps Pimco Total Return Fund from target-date retirement funds

Schwab dumps Pimco Total Return Fund from target-date retirement funds
Discount brokerage Charles Schwab Corp. has decided there is no place for Pimco Total Return Fund in the holdings of Schwab's target-date retirement funds now that superstar bond trader Bill Gross has left Pimco. (Jay L. Clendenin / Los Angeles Times)

Charles Schwab Corp. said Thursday it would no longer include Pacific Investment Management Co.'s Total Return Fund among the holdings of Schwab's target-date retirement funds now that bond-trading superstar Bill Gross has left Pimco.

The giant discount brokerage made the disclosure Thursday, a day after Pimco said the net assets of the Total Return Fund, the largest bond fund in the world, had dropped by $23.5 billion in September.

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Total Return, which is among more than 80 bond funds at Newport Beach-based Pimco, has suffered an ongoing decline in assets since the middle of last year, as Gross' returns, once reliably stellar, became spotty. But previous withdrawals were dwarfed by the outflow when Gross walked out.

The largest share of investor withdrawals came last Friday, when Gross, who had managed Total Return himself since it was created in 1987, announced he was quitting Pimco to run a free-wheeling global bond fund for Janus Capital Group Inc., a Denver mutual fund company.

Target-date retirement funds are designed for people who don't want to pick their own investments for their corporate or personal retirement accounts. As the investors age, the funds' holdings become more conservative, reducing stock holdings and adding lower-risk bonds to the mix.

Alison Wertheim, a spokeswoman for San Francisco-based Schwab, said "ongoing organizational changes" at Pimco had caused Schwab to remove Total Return from all its retail target-date funds. The decision was made this week, Wertheim said.

Wertheim said Schwab also removed Pimco as a separate account manager for an institutional fund that holds investments from a group of Schwab target-date funds.

Wertheim declined to say how much of Schwab's $2.85 billion in target-date mutual funds had been invested in Pimco Total Return Fund, which as of the end of August still had about $200 billion in investor money under management.

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