Investors who pulled an estimated $52.7 billion from the Pimco Total Return Fund this year may feel like freeway drivers who changed lanes only to see themselves falling behind traffic.
The erstwhile largest bond mutual fund outperformed 89 percent of peers in the first calendar year since the ouster of its former manager Bill Gross, returning almost 1 percent through Dec. 28, according to data compiled by Bloomberg. Among those it bested were four of the five funds with the largest influx of new money this year through Nov. 30 that Bloomberg classifies as following total return strategies.
The performance, a rebound from two years in which it trailed a majority of peers, helped slow a torrent of redemptions following the September 2014 departure of Gross, who had built Total Return into a $293 billion behemoth at its peak in 2013. The fund, which now has $92 billion in assets, avoided the debt of energy companies, emerging markets and other high- yield bonds that caused losses for many investors, according to Scott Mather and Mihir Worah, two of the fund’s three co- managers.
“We’ve been defensive,” Worah said in a conference room at Pacific Investment Management Co.’s headquarters in Newport Beach, California, overlooking the Pacific Ocean. “We now expect to be selectively offensive.”
For 2016, the managers say they see opportunities in energy-related investments, including Mexican government bonds, and currencies such as the Russian ruble, Norwegian krone and Canadian dollar. Pimco’s forecasts include an expectation that oil will climb as high as $70 a barrel, about double the recent crude price lows.
“The next opportunity that gives you returns -- it’s staring you in the face,” said Worah. “It’s energy markets and emerging markets. Sometime in the next six to 18 months is probably going to be the next opportunity.”
Pimco’s fund this year has outperformed rivals from TCW Group, Dodge & Cox, Vanguard Group and Fidelity Investments, the recipients of the biggest inflows in the strategy. The $69.7 billion Metropolitan West Total Return Bond Fund, which received more than $18 billion in net new money, according to data compiled by Bloomberg, is up 0.4 percent in 2015. It outperformed Pimco Total Return over three and five years.
Doug Morris, a spokesman for TCW Group, the parent of the MetWest funds, declined to comment.
The Pimco flagship has also done better this year than the $43.9 billion Dodge & Cox Income Fund, which attracted $4.7 billion and has declined 0.5 percent, according to Bloomberg data.
“On a three, five and ten year basis, the fund has outperformed its benchmark and the majority of its peers,” Steve Gorski, a spokesman for San Francisco-based Dodge & Cox, said in an e-mail.