Bond Fund Outflows Plague Bill Gross and PIMCO — or Do They?

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The media debate over PIMCO about who said what between “bond king” Bill Gross and Mohamed El-Erian is not in the news so much right now, but the reputational damage to the firm may still be a front and center issue. Reports indicate that Allianz and its shareholders have not left the situation unnoticed — and a new report from Morningstar shows that outflows of assets under management at PIMCO remain an issue.

Morningstar showed many areas, but it did show that the multisector bond category was one of the best categories in general, and that there was a $951 million inflow for PIMCO Income Fund. Morningstar called this a bright spot for PIMCO because it represents that PIMCO has seen some $79.9 billion in outflows over the past 12 months.

It is interesting that much of the outflows have taken place around an infighting that became very public. Bill Gross seems to be making fewer media appearances. It also coincides with a period in which the Federal Reserve has begun its tapering of bond buying.

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Morningstar said that two of the five bottom-flowing funds featured, meaning funds with outflows, belonged to PIMCO. Those are shown below.

PIMCO Total Return Fund with outflows of -3.128 billion in April 2014, -$11.379 billion year-to-date and -55.264 billion over the past year. This fund’s assets were listed as $230.431 billion.

PIMCO Unconstrained Bond Fund had outflows of $721 million in April 2014, outflows at -$3.45 billion year-to-date and total outflows of $908 million over the past year. The fund’s total assets were listed as $23.753 billion.

Of the top 10 in open-end fund families, Morningstar showed that the fund flows at PIMCO were the worst of the 10 companies by far. PIMCO’s total open-end fund outflows were -$5.494 billion in April of 2014. The year-to-date figure was an outflow of -$20.995 billion, and the outflows over the past year have been -$79.936 billion. With some $508 billion in total open-end assets mentioned, investors should pay attention to these trends. Still, PIMCO has close to $1.5 trillion in total assets among all funds and managed accounts.

A lot of the outflows news depends on who covers it. CNN Money showed the PIMCO outflows as $30 billion in the headline from May 14, but this is less recent data (first quarter) than Morningstar’s report issued on the same day.

Something that investors might also want to consider is that PIMCO outflows are not new here. Many investors have been leaving bond funds, fearing that rising interest rates and the Federal Reserve’s exit from quantitative easing would wipe out those big bond gains. Also, the feud between Bill Gross and Mohamed El-Erian only surfaced this year, as did reports about Bill Gross being less than cuddly with employees at work.

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Investors may or may not care about the personality of Bill Gross. What they do care about is getting caught in the next bear market in bonds. After all, Morningstar showed that the first four months were great for U.S. equity funds, bringing in some $25.2 billion in the first four months of 2014.

Bill Gross recently said in his New Neutral secular outlook, “For investors, there appears to be more risk than reward on the horizon. However, if the New Neutral plays out, the risk may be lower than expected as growth trends, while slower, are more stable.”