According to BankInvestmentConsultant, Investors are leaving the Pimco Total Return Fund in massive numbers as October 2014's withdrawals reached an estimated $27.5 billion, which follows September's $23.5 billion in reported redemptions. To put it in perspective, the world's largest bond mutual fund—The Pimco Total Return Fund—has lost over $120 billion in assets over the past year, falling to just $170.9 billion after a high of $293 billion in April 2013.
The mass exodus seems to have been triggered by the actions of Pimco co-founder Bill Gross, who left the fund in late September. Gross resigned after misjudging the time and impact of the Federal Reserve's plan to scale back its bond-buying program, betting on intermediate-term bonds that have underperformed longer-dated securities and triggering the largest daily redemption in September, which came the day after his resignation.
According to research firm Morningstar Inc., Pimco's September and October monthly withdrawals of $23.5 and $27.5 billion, respectively, are by far the highest since June 2013's $9.6 billion withdrawal, demonstrating that Gross' departure exacerbated the trend toward withdrawals that begin in May 2013, when investors began removing money from traditional fixed-income strategies while anticipating a rise in interest rates.
Firms and investors who have taken money out of the Pimco Total Return Fund include Prudential Financial, Massachusetts Mutual Life Insurance, Alabama's treasury, the Florida state pension, and former Pimco parent Pacific Life Insurance.
When a mutual fund experiences large and unexpected redemptions, it may be a challenge for the fund's managers to raise the necessary cash to meet the demand for redemptions. If there are insufficient cash reserves, the fund's managers must sell assets, the fund's investments, to meet the redemption demands. When assets have to be sold in large quantities, the fund's holdings may become skewed to greater concentration in higher risk assets. Additionally, as money flows out of a fund, the volume of the outflow may outright depress the fund's NAV. Outsized redemptions, poor management, and risky investments led to the demise of many income-generating mutual funds in 2008, including Charles Schwab's YieldPlus Fund. As of this posting, for the past three months, Morningstar reports Pimco Total Return Fund Class A (PTTAX) generated .49% return for investor.
If you have invested in Pimco's Total Return Fund or with any firm or investment vehicle involved with the Total Return Fund, and such involvement has proven harmful to your investments or interests as withdrawals and rates grew while bond prices dropped over the Federal Reserve plan, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for investigation and consultation.