2013 Outflows From Gross’ BOND Modest

January 06, 2014

BOND had outflows last year, but nothing like those of sister portfolio, the Pimco Total Return Fund.

Pimco’s flagship mutual fund, the Total Return Fund, may have seen mutual-fund-industry record-breaking asset outflows in 2013, but the firm’s ETF version of the same strategy, the Pimco Total Return ETF (BOND | B-30), ended the year almost even in terms of flows.

BOND, which attracted more than $1.27 billion after four consecutive months of net inflows at the beginning of 2013, went on to bleed slightly more than $1.43 billion in the following eight months, ending the year with net outflows of just under $165 million. That compares with some $41 billion in net outflows from the competing mutual fund strategy, as reported by the Wall Street Journal.

BOND’s 2013 outflows as a percentage of end-of-year assets were 4.7 percent, while the Pimco Total Return Fund’s (PTTRX) outflows were nearly 17 percent of year-end assets under management.

This asset-gathering disparity points to a growing phenomenon in the financial world; namely, that ETFs are slowly dislocating mutual fund assets, attracting more and more investors to the transparent, low-cost and tradable value proposition that is the exchange-traded fund.

Net Inflows For Pimco

Indeed, despite the challenging environment for fixed income, and Pimco’s asset losses in its flagship fund, the world’s largest bond manager still had a stellar year in terms of ETF asset flows. The firm’s family of bond ETFs managed to net more than $4.3 billion—or roughly half of all asset flows into the asset class in 2013.

There’s no question that 2013 was a difficult year for bond investors in general, many of whom opted to shorten duration or replace interest-rate risk for credit risk altogether as they braced for higher interest rates ahead.

The Federal Reserve’s anticipated tapering of its quantitative easing program had many looking for higher rates to follow, pressuring bond prices, particularly long-dated debt. The higher the interest rates, the lower the bond prices.

BOND is an actively managed portfolio made up primarily of investment-grade bonds, designed to maintain a duration that is within two years of that of the Barclays U.S. Aggregate Index. The $3.94 billion fund has a current duration of 4.9 years, and yield to maturity of 2.67 percent, according to IndexUniverse data.

BOND’s modest asset losses came hand in hand with net inflows of more than $1.71 billion into Pimco’s Enhanced Short Maturity Strategy (MINT | A). MINT is also an actively managed fund, but one that invests in ultra-short-term debt securities.

The portfolio has a duration of about one year, and is serving up yield to maturity of 0.74 percent. MINT has grown to surpass BOND as Pimco’s largest ETF, with more than $4.2 billion in assets today.


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