How PIMCO ETFs Have Handled Bill Gross’s Departure

by on November 17, 2014 | ETFs Mentioned:

Bill Gross shocked the investing world on September 26, 2014 when he announced that he would be leaving PIMCO for rival Janus Capital Group. Gross co-founded PIMCO and spent over 40 years earning a name as one of the most famous fixed income managers of all time, which made his exit all the more surprising. Since he left, PIMCO has lost over $50 billion in total assets, with about $1 billion flowing into Janus. But have PIMCO’s ETFs suffered the same fate? Below, we take a look at how some of PIMCO’s exchange traded products have dealt with Gross’s departure [for more ETF news and analysis subscribe to our free ETF Daily Roundup].

PIMCO Outflows

As many expected, some of PIMCO’s ETFs saw heavy outflows, but the exodus has not been nearly as pronounced as it was for the company’s mutual funds. This table shows the net investing flows of PIMCO’s five largest ETFs since the day that Gross announced he would be leaving:

ETF Assets (MM) Net Flows since 9/26/2014 (MM)
Enhanced Short Maturity Strategy Fund (MINT $3,625  -$63.6 
0-5 Year High Yield Corporate Bond Index Fund (HYS $3,320  -$742.5 
Total Return Exchange-Traded Fund (BOND $2,475  -$1,111.1 
1-5 Year U.S. TIPS Index Fund (STPZ $1,380  -$34.3 
Investment Grade Corporate Bond Index Fund (CORP $255  +$15.4 

It comes as no surprise to see BOND suffer the worst, as the product was actively managed and is the ETF version of Gross’s most famous product, the Total Return Fund (PTTRX). HYS is a surprising result given that it was an indexed product, meaning that the fund had virtually nothing to do with Gross himself. Still, investors felt compelled to withdraw three quarters of a billion from its massive asset base. MINT, despite being actively managed, saw barely any outflows at all, as $63 million is a drop in the bucket for a fund worth $3.6 billion. Finally, STPZ and CORP are two indexed products (with no ties whatsoever to Gross) and saw normal inflow/outflow activity over that time period [see also Bond ETFs In Focus: Defining All The Yield Metrics].

Bill GrossActive Management Losing 

As the years press on, active management has been losing the battle to passive funds, as many managers fail to outperform their benchmarks. The last few years have even seen superstar managers like Bill Gross seemingly lose their touch, as many accused him of being ineffective as time went on. The current trend for retail investors has been to put more money into index products that carry low costs and often outperform active managers, and this is a trend that PIMCO clearly sees, as it has launched more index ETFs than it has actively managed ones.

The loss of Gross put quite a dent in one of PIMCO’s most popular ETFs, but it likely will smooth out over the long term. With a suite of index products and other active funds that investors still believe in, the loss of Gross will fade in time and the company’s ETFs will likely continue to attract new interest. Now, all eyes are fixated on Janus to see if it will throw its hat into the ETF ring.

Follow me on Twitter @JaredCummans.

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Disclosure: No positions at time of writing.