(Bloomberg) -- The Pimco Total Return Fund suffered an estimated $27.5 billion of withdrawals in its first full month after the Sept. 26 departure of Bill Gross, its worst month ever for redemptions.
The October redemptions surpassed the $23.5 billion reported in September, according to a statement from Newport Beach, California-based Pacific Investment Management today. Half of the withdrawals occurred during the first five trading days of October and slowed sharply thereafter, Daniel Tarman, a Pimco spokesman, said in the statement. The worlds biggest bond mutual fund now has $170.9 billion in assets, from a peak of $293 billion in 2013.
Pimco is seeking to reassure clients after Grosss resignation triggered the worst investor redemptions in the funds history, exacerbating a trend that started in May 2013 as performance trailed peers and investors removed money from traditional fixed-income strategies in anticipation of rising interest rates. Clients are reviewing their investments, moving money to competitors such as TCW Group and DoubleLine Capital LP or parking it in money-market funds and exchange- traded funds while they reevaluate.
The largest daily redemption in September came the day of Grosss departure, Pimco said Oct. 1 in a statement. The biggest previous monthly withdrawal was $9.6 billion in June 2013, according to research firm Morningstar Inc.
Prudential Financial, former Pimco parent Pacific Life Insurance, Massachusetts Mutual Life Insurance., Alabamas Treasury and Floridas state pension have all moved money from Pimco in recent weeks.
Gross, who co-founded Pimco in 1971 and built it into a $1.87 trillion money manager, departed after his deputies threatened to quit and management debated his ouster, according to people familiar with the matter. He abruptly resigned to run an unconstrained fund at money manager Janus Capital Group.
Investors have been withdrawing assets from the Pimco Total Return Bond Fund in anticipation of rising interest rates and as performance lagged behind competitors. Returns in the past 12 months of 3.3% trailed 64% of comparable funds, according to data compiled by Bloomberg. Over five years, the fund beat 63% of peers.
Last year, Total Return lost a record $41.1 billion from client redemptions, according to Chicago-based Morningstar.
The fund more than doubled its assets from $132 billion at the end of 2008, after weathering the financial crisis with returns that beat 83% of rivals. The fund ballooned to a peak of $293 billion in April 2013.
That year, Gross misjudged the timing and impact of the Federal Reserves plan to reduce its asset purchases. Total Returns performance was hurt when former Federal Reserve Chairman Ben S. Bernanke hinted in May 2013 that the central bank might scale back its bond-buying program, a signal that sent rates higher and bond prices lower.
This year, Gross bet on intermediate-term bonds which have underperformed longer-dated securities.
The new chiefs are trying to calm clients, saying there will be no major changes in investment strategy at Total Return. They arent increasing cash-like holdings in the fund to meet redemptions, Scott Mather, one of three newly appointed managers, said in October.
Its business as usual, Mather said in a telephone interview in September after the management changes. Weve all been part of the team as members of the investment committee.
- Pimco Is Replaced by BlackRock at $6.16 Billion Prudential Fund
- BlackRock Lowering Fees and Expenses on Three Fixed-Income Funds
- Janus Hoping Gross Hire Will Boost Assets