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Investors 'not fazed' by Gross departure

Limited options for New Zealand investors may dull the impact in this country of Bill Gross’ departure from PIMCO, one commentator says.

Thursday, October 30th 2014, 6:00AM 1 Comment

by Susan Edmunds

PIMCO founderGross has left the company for a new job at rival Janus Capital. It follows a bad run at PIMCO – an investigation is reportedly under way into pricing irregularities in the firm’s ETFs.

Morningstar in the US predicted that tens of billions in AUM would follow Gross to Janus.

PIMCO is believed to manage more than $1 billion in New Zealand money, mainly through Fisher Funds and Russell Investments. The Fisher Funds BondPlus global fixed interest fund has about $140 million under management – Fisher says it uses PIMCO for the company’s expertise in global fixed interest.

Carmel Fisher said Fisher Funds had not yet noticed any impact as a result of Gross leaving.

“While Gross has an enviable reputation, our investors generally realise their funds are managed by the large and experienced team at PIMCO rather than by one individual.  Also, for many of our clients, PIMCO is but one manager in a multi-manager portfolio.”

Alister van der Maas of Russell Investments in New Zealand would not comment on what impact Gross’ departure had had on Russell’s funds.

In the US, Russell said it was replacing PIMCO with Scout Investments Inc on its US short-duration and core-plus portfolios.

Tim Murphy, spokesman for research house Morningstar, said there had been clear effects from Gross’ departure in the United States. “There had been significant outflow for 12 to 18 months before the announcement, anyway.”

But he said New Zealand and Australia had not been similarly affected.

“We’ve been tracking the issue pretty closely. There are a couple of New Zealand funds that have PIMCO as the underlying manager and they have own-branded funds in Australia. Australia has seen continued inflow since Bill Gross’ announcement…. We haven’t seen [movement] in a meaningful way in New Zealand.”

Fisher Funds would be the most likely to be affected, he said, because PIMCO managed 90 per cent of its BondPlus fund. Russell’s multimanager fund was only 30% with PIMCO.

“There’s been no movement seen so far. That can of course change at any time but we like to think that people have a long-term view of these things,” Murphy said.

Fisher Funds’ bond fund had been under review anyay by Morningstar after a change in manager and PIMCO mandate and the research house would update that soon, he said.

But Murphy said there were few alternatives in New Zealand. “Even if you thought PIMCO was a sell, where would you put your money? There are not many global fixed interest options for New Zealand investors to consider.”

Morningstar has placed most PIMCO strategies it rates globally Under Review while it more thoroughly assesses the effect on portfolios and the firm as a whole.

Since there will be no changes at the Sydney office or the managers on PIMCO EQT Wholesale Australian Bond 10881 and PIMCO EQT Wholesale PIMCO Australian Focus 17158, Morningstar said it felt comfortable they would be largely unaffected. They remain rated Gold and Silver, respectively.

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Comments from our readers

On 30 October 2014 at 9:22 am Pragmatic said:
Don't underestimate the significance of this departure
With institutional investors leaving in their droves, the PIMCO provisions are no doubt being recalibrated upwards of $500bn

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