Pacific Investment Management Co., the world’s largest active fixed-income manager, absorbed a record $14.5 billion in net redemptions last month across its U.S. mutual funds as investors fled bonds in anticipation of the Federal Reserve scaling back its asset purchases.
The last time Pimco’s U.S. mutual funds had net withdrawals was in December 2011, when investors pulled $2.1 billion, according to Chicago-based research firm Morningstar Inc., which provided the June estimate. The redemption is Pimco’s highest since Morningstar started estimating the monthly flows in February 1993.
Withdrawals at Pimco were driven by a record $9.9 billion pulled last month from Bill Gross’s Pimco Total Return Fund, the world’s largest mutual fund, which left it with $268 billion in assets at the end of June. Pimco Total Return lost 4.2 percent this year through July 5, trailing 86 percent of peers, according to data compiled by Bloomberg. It fell 3.7 percent over the past month, worse than 95 percent of comparable funds.
Retail investors, who fled volatile stock markets to pour about $1 trillion into the perceived safety of bond funds since the beginning of 2009, reversed that pattern in the past month in anticipation of rising rates. Casey, Quirk & Associates LLC, a consulting firm, in May warned that money managers that rely on bonds could face a difficult future as investors shift $1 trillion away from traditional fixed-income strategies.
Investors pulled about $60 billion from U.S. bond funds in June, the biggest monthly redemptions in records going back to 1961, according to estimates from the Investment Company Institute.
As of May 31, Pimco managed $590 billion in U.S. mutual funds, excluding money markets and funds of funds, or more than a quarter of its $2 trillion in assets. Pimco’s products also include separately managed accounts.
“Pimco is a long-term investor and the Total Return Fund has been one of the top-performing intermediate bond funds during the fund’s 26-year history, delivering investor value over myriad market cycles,” Mark Porterfield, a spokesman for Newport Beach, California-based Pimco, said in an e-mailed statement. Pimco is a unit of Munich-based insurer Allianz SE.
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