Bond teams worldwide will be hunting Pimco fund outflows

Bond teams around the world will be eagerly hustling to pick up outflows from the massive $220bn Pimco Total Return fund after bond supremo Bill Gross’s shock move.

FundCalibre managing director Darius McDermott says Pimco founder Gross’s move to Janus Capital is “seismic” for the global asset management industry.

The Pimco bond fund is the largest in the world.

“Neil Woodford’s exit from Invesco Perpetual pales in comparison to this departure,” McDermott says.

“Despite some performance issues in the last few years, Gross has arguably been the best global bond manager in history.”

Many fixed income teams around the world will see the move as chance to pick up some assets in the wake of outflows, he says.

“While this is clearly a stunning addition to the Janus fixed income team, for Pimco, it can only be looked upon as a major loss.”

Pimco has been unable to clarify how it will restructure the fund following manager Bill Gross’s shock departure.

The company has publicly confirmed it has a succession plan, but has remained silent on the details.

Brewin Dolphin head of research Guy Foster says the global asset manager could not give any details about how it will restructure Gross’s portfolios when the wealth manager called in the wake of the bond veteran’s move.

“We have spoken to Pimco, but they couldn’t provide any details on how they would restructure following his departure,” he says.

Investors should not be worried about the fund’s ability to meet redemptions, he Foster says.

“Some 60 per cent of the Total Return fund’s holdings are US government or agency securities. Investors should not be concerned with the fund’s ability to manage large withdrawals as a result of this announcement.”

Gross does run other, much less liquid, strategies which could become problematic, he adds.

 “We feel, however, that there is a risk of large withdrawals in Pimco’s other less liquid mandates and it is difficult to judge at the moment how the market is going to cope with these,” he explains.

“We aren’t yet seeing any meaningful reaction in credit which is where the biggest risk would lie.”

Brewin is continuing to monitor that market, he adds.

An “obvious successor” would be Mohammed El Erian, who left his chief investment officer role with the firm earlier this year, Foster says.

However, Bloomberg reports Pimco denying that El Erian would return to fill the vacuum.

“Perhaps pre-emptively El Erian had revealed this week that work-life balance had been the reason he left Pimco, rather than the much-covered souring of his relationship with Bill Gross,” Foster says.

Square Mile senior investment research analyst Victoria Hasler says the firm’s Academy of Funds includes two Pimco funds – the Pimco Select UK Income and the Allianz Gilt Yield fund – however both are run from London and will be unaffected by the changes in the US.

“Whilst the funds use the Pimco process and in particular the output from the secular investment forum chaired by Gross, both funds are UK focused and managed using the experience and expertise of the European investment team,” she explains. 

“It should also be noted that Pimco has, over the years, attracted the highest calibre of investment professionals and we have no reason to doubt that the debate, discussion and output from Pimco’s investment team will suffer as a result of Gross’ departure.”