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Reports US

US stock market daily report (April 02, 2014, Wednesday)

April 3, 2014, Thursday, 02:40 GMT | 21:40 EST | 07:10 IST | 09:40 SGT
Contributed by Millennium Traders


Bill Gross, co-founder and manager of the world's largest bond fund located in Newport Beach, California, feels pressure mounting as he investors withdrew $3.1 billion from Pimco Total Return Fund (PTRF) - Pimco's flagship fund - during March. PTRF is an actively managed exchange-traded fund designed to mimic the strategy of the flagship mutual fund. The month showed a drop in performance by 95% due to wrong moves by Gross. Since May 2013, investors have pulled $52.1 billion out of Pimco Fund. March marks the 11th straight month of outflows for the PTRF. As of December 31, Pimco - a unit of European financial services company Allianz SE - had $1.91 trillion in assets under management.

Latest outflows from the PTRF saw a reduction in portfolio's assets to $232 billion with a year to date return of only 1.29%. The sub-standard performance is trailing returns of peers by 85%. Reports are that PTRF drop in performance during March was attributed to significant overweight position in shorter debt as well as its underweight position in long-dated bonds. At the end of February 2014, PTRF maintained a 29% exposure to mortgages. As of the end of March, PTRF annualized returns for five-year came in at 6.87% and 10-year came in at 5.89%, outperforming the benchmark Barclays U.S. Aggregate Bond Index by 2.07 percentage points and 1.42 percentage points, respectively.

Investors remain concerned over leadership changes at Pimco over the past 12 months with numerous U.S. institutional investors and retirement systems adding Pimco to their 'watch list' due to a sharp drop in performance. On February 28 the North Dakota State Investment Board, which has nearly $400 million invested, put PTRF on its 'watch list'. The largest U.S. pension fund - the California Public Employees' Retirement System, is monitoring the situation closely with Pimco.

Bill Gross, named the market's "Bond King", has been dealing with management shakeup and disappointing performance as he deals with public fall-out with Mohamed El-Erian who shared the co-chief investment officer title.

Spokesman for Pimco, Mark Porterfield said, "It's important to compare a fund's performance with its benchmark and not just with other mutual funds, which could hold riskier and higher-yielding assets. Total Return has outperformed its index for the past six months, two, five and 10 years."

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