Assets of Pimco Total Return Fund dropped by a staggering $41.1 billion in 2013 after making a wrong bet in US Treasuries, resulting to the worst annual performance of the world's biggest bond fund in nearly twenty years, Reuters reported. Citing preliminary data from Morningstar, the report said investors withdrew $4.2 billion from the fund last month. This marked the eighth month in a row of outflows and lowered the fund's assets to $237 billion. The fund experienced its first annual loss last year since 1999 and its worst showing since 1994 when it dropped 1.9%.
The report said outflows across all of Pimco's US open-end mutual funds in December amounted to $10.4 billion which resulted to total withdrawals of $31.1 billion for the entire year. This is the first annual outflows recorded from those funds since 1993 when Morningstar first started tracking them.
Pimco is a unit of Allianz SE, a Europe-based financial services firm, and is one of the largest bond managers in the world. Its website said that it had $1.97 trillion in assets as of September 30, 2013, making its fund's status closely-monitored, Reuters reported.
Morningstar data also revealed that in December, investors withdrew $147 million from the Pimco Total Return Exchange-Traded Fund. For 2013, the ETF recorded $197 million worth of net outflows. The ETF also suffered the worst performance among its peers when it dropped 0.85% in December. For 2013, however, the ETF still outperformed 80% of its peers even if it dropped 1.2%, the report said.
Last year, Pimco Total Return Fund held a large holding in Treasuries when Federal Reserve Chairman Ben Bernanke told Congress in May that it may start tapering its $85 billion monthly bond-buying program later in the year, prompting a selloff in Treasuries and other bonds.
S&P Capital IQ Director of Mutual Fund Research Todd Rosenbluth told Reuters, "They were on the wrong side of the direction of U.S. interest rates."
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