Tuesday 16 January 2018

Investors flee bonds over Fed fears

Charles Stein

INVESTORS pulled a record $9.9bn (€7.6bn) out of Bill Gross's Pimco Total Return Fund last month as they fled bonds in anticipation of the Federal Reserve scaling back its purchases.

Pacific Investment Management Co (PIMCO), the California-based firm that runs the fund, provided the preliminary estimate to research firm Morningstar in an emailed statement.

The withdrawals left the fund with $268bn in assets at the end of June, Morningstar said.

"Money really came out of core bond funds in June," Michael Rawson, an analyst with Morningstar said in an interview. "The market reacted to the Fed."

The withdrawals show the vulnerability of Pimco and other fund managers with a heavy weighting in bonds to a sustained decline in fixed-income markets.

More than 90pc of Pimco's $2.04 trillion in assets as of March 31 were in bonds.

Pimco Total Return lost 2.9pc this year through yesterday, trailing 87pc of peers, according to data compiled by Bloomberg. It fell 2.5pc over the past month, worse than 92pc of comparable funds.

The 10-year US Treasury note traded at 2.48pc today, up from 1.93pc on May 31.

Mr Gross and others have argued that the worst is over for bond investors. (Bloomberg)

Irish Independent

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