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October 3, 2014

Bill Gross Leaves PIMCO for Janus Capital Group; Investors Flee PIMCO Total Return Bond Fund

by Pat Keon, CFA.

On Friday, September 26, Janus Capital Group issued a press release stating that Bill Gross would be joining their firm effective Monday, October 6, to run the recently launched Janus Unconstrained Bond Fund (JUCAX) and other global macro strategies.  The news that Bill Gross would be leaving the firm that he co-founded in 1971 brought to an end months of infighting and power struggles at PIMCO, during which time the heir apparent to Gross (Mohamed El-Erian) abruptly resigned from the firm. This period was also marked by 16 consecutive monthly net outflows from Gross’s flagship fund, PIMCO Total Return Bond Fund (PTTRX). Since its peak in April 2013 (when it had over $292 billion in assets under management) PTTRX experienced aggregate net outflows of over $69 billion through August 2014. The announcement that Gross would be leaving the firm sent investors running for the door in record numbers. PIMCO confirmed the fund had $23.5 billion of net outflows for September, the largest monthly outflows ever for the fund. To put the September number in perspective, during the fund’s 16-month downturn directly preceding (May 2013–August 2014) the monthly net outflows averaged only $4.3 billion. The largest daily net outflow for the fund occurred on the day of the announcement.

The majority of the outflows from PTTRX appear to have been shifted to institutional money market funds, which had positive net flows of $17.1 billion coinciding with the end-of-month activity of the PIMCO fund. It’s possible this move was a temporary one while investors research where they want to allocate their funds. There was also evidence that some of PIMCO’s peers benefitted from Gross’s departure. Among this group, MetWest Total Return Fund (MWTIX) and DoubleLine Total Return Fund (DBLTX) had the largest net inflows, with increases of $1.2 billion and $647 million, respectively.

 

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