As investors around the world consider pulling their assets from former PIMCO CIO Bill Gross’ Total Return flagship, the fund has started to outperform a custom benchmark created by Morningstar analysts.
The index “aims to achieve as close a correlation as possible to the fund using long-only investments in passive indexes.”
Gross’ departure from the firm he founded in 1971 was announced on September 26. In the following week of September 29 to October 3—despite its massive outflows—Total Return outperformed this benchmark by 19 basis points.
“To put this in context,” Morningstar said, “we compared the performance of the fund with the custom index during the third quarter up to the day of Gross’ departure. During that period, the fund trailed the benchmark by an estimated 53 basis points.”
In each of the four weeks leading up to Gross’ departure, the fund trailed its custom index.
Additionally, over the past week the fund has pulled closer to PIMCO’s own benchmark—the Barclays US Aggregate Bond Total Return index—but hasn’t yet outperformed it on a short- to medium-term basis.
Prior to Gross’ resignation, the fund had been averaging daily outflows of about $140 million, Morningstar said. In September, some $23.5 billion was pulled from the company—the greatest percentage of which exited on September 26.
“Last week’s shift from negative to positive performance relative to the custom index could have something to do with how PIMCO handled shareholder redemptions,” Morningstar said, “but the results indicate that last week’s outflows do not appear to have harmed performance in any meaningful way.”
The analysts said outflows from the exchange-traded fund created by PIMCO to mirror its flagship had moderated since the announcement of Gross’ departure, and they expected flows from Total Return had done the same.
In September, CIO examined how large funds’ performance often suffered because of their size.
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