Agency bonds started to slow down in the fourth quarter and underperformed Treasuries, according to Bank of America Merrill Lynch index data. This year, they’ve returned 0.22 percent compared to 0.11 percent for Treasuries, the data show.
The mortgage allocation of the Pimco fund may also have increased as managers maintained its non-agency bonds while selling securities in other sectors, said Sarah Bush, a senior analyst at research firm Morningstar Inc. Mather said the fund’s non-agency position hasn’t changed meaningfully since September.
Pimco Total Return suffered the most client withdrawals in the history of fund management last year as investors pulled a record $105 billion. In 2014, the firm also lost its co-Chief Investment Officer Mohamed El-Erian. Withdrawals from the $125 billion fund slowed to $8.6 billion in February, the lowest in six months.
Gross’s Legacy
The Pimco fund trailed the majority of its peers for three of the last four years of Gross’s management. Before then, the bond king had mostly been untouchable while his fund topped peer rankings and assets more than quintupled over the past decade.
Gross, 70, said he was leaving Pimco on Sept. 26 and joining Janus Capital Group Inc. The executive committee had threatened to oust him following a power struggle with senior executives. Dan Ivascyn, and MBS expert, is now Pimco’s group chief investment officer.
“It can’t be ignored that this is their opportunity to remake the portfolio in their image,” said Jeff Tjornehoj, an analyst at Denver-based Lipper, a research firm.
Erin Freeman, a spokeswoman at Janus, didn’t respond to an e-mail requesting a comment from Gross.
BlackRock Sells
Gross was actively buying and selling mortgage securities throughout his time running the fund, including having more than a 50 percent allocation to the bonds in mid-2009, according to Tjornehoj.