Gross' flagship fund endures hefty September redemptions

Bill Gross's Pimco Total Return Fund, the world's biggest mutual fund, had its fifth straight month of withdrawals as investors continued to flee bonds. Clients pulled an estimated $5.4 billion from Pacific Investment Management Co.'s Total Return Fund, leaving the fund with assets of $250 billion at the end of September, Chicago- based research firm Morningstar Inc. said in an e-mailed statement on Wednesday. Jeffrey Gundlach's DoubleLine Total Return Bond Fund had $2.1 billion of net redemptions last month, its most ever, Morningstar said yesterday. Bond fund withdrawals were triggered by U.S. Federal Reserve Chairman Ben Bernanke, who told Congress on May 22 that the central bank could start reducing its bond purchases and is prepared to begin phasing out its unprecedented easing program later this year. The central bank unexpectedly refrained from tapering its $85 billion in monthly bond purchases at the Sept. 17-18 policy meeting, saying it needs more evidence of lasting improvement in the economy. Investors have pulled about $118 billion from U.S. bond funds from May 31 through Sept. 18, according to estimates from the Investment Company Institute. “While core bond categories have experienced outflows industry-wide, we have continued to see inflows into absolute return and unconstrained strategies,” Mark Porterfield, a spokesman for Pimco, said in an e-mailed statement. Pimco Total Return returned 1.7% in the past month, beating 98% of peers, according to data compiled by Bloomberg. The fund declined 2% this year, putting it behind 54% of similarly managed funds, the data show. Over the past five years, it has returned an average of 7.9%, ahead of 89% of rivals. Pimco, based in Newport Beach, California, is a unit of Munich-based insurer Allianz SE. The firm had about $1.97 trillion in assets as of June 30. Morningstar estimates deposits or withdrawals for mutual funds by computing the change in assets on a monthly basis that isn't accounted for by performance. The fund's actual withdrawals or deposits may differ from Morningstar's estimates because of the timing of purchases and redemptions or dividend distributions. (Bloomberg News)