Money going into stocks....its all about flows of funds boys flow of funds....S&P won't stop up ward movement until the cash stops pouring in them.
November 4, 2013 6:24 pm
Pimco loses biggest fund crown to Vanguard By Stephen Foley in New York
The Pimco Total Return Fund, run by bond market guru Bill Gross, has lost its crown as the largest mutual fund in the world, as investors shun traditional fixed income in favour of
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soaring equity markets.
Vanguard’s Total Stock Market Index Fund, which tracks the entire US equity market, overtook Pimco last month, according to data from Morningstar, and it now has $250bn under managem
Mr Gross’s flagship fund fell to $248bn in assets at the end of October, after another month of withdrawals. Investors asked for $4.4bn back last month, taking the outflows for 2013 so far to $33.2bn.
“Bill Gross himself has not been cheerleading people into his fund,” said Michael Rawson, fund flows analyst at Morningstar.
The possibility of rising interest rates mean core bond funds are at risk of falling in value, meaning investors are seeking out smaller, flexible fixed income funds that can invest more in credit instruments and emerging markets debt, Mr Rawson said.
“This is not an indictment of Bill Gross or an indictment of his performance. Other similar funds are under similar pressure.”
Morningstar calculates that another bond guru, Jeffrey Gundlach, has suffered significant outflows from his DoubleLine Total Return. Investors have withdrawn $3.1bn this year, helping cut its assets to $34bn.
The contrasting fortunes of the fixed income and equity markets in 2013 help explain investors’ behaviour. The S&P 500 index of US stocks is up 24 per cent year to date, while the Barclays Aggregate, a broad measure of the US bond market, has returned minus 1.4 per cent.
Both Vanguard and Pimco were among the most successful funds at attracting new money last year – the Total Stock Market Index Fund collected $13.8bn, and Pimco’s Total Return Fund gathered $18bn – but the pair have gone in different directions in 2013.
The Vanguard fund has collected an additional $12.4bn and, with investment returns on top, has swollen from $199bn at the start of the year.
Mr Gross has mused repeatedly this year on the outlook for bonds as interest rates rise, and on the need for investors to adopt new approaches to investing in fixed income, including picking more flexible funds.
In August, in a letter to investors titled “ Bond Wars”, he likened the rout in bond markets to the World War I battle of the Somme and wondered if “the bond ‘horse and sabre’ had given way to the alternative asset ‘machine gun’ of a new era”.
Last week, Pimco hired Virginie Maisonneuve from Schroders in London to lead a new effort to expand into equity fund management. |
