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Mohamed El-Erian’s shock resignation from PIMCO is still making headlines and for all the wrong reasons. PIMCO and its chief executive Bill Gross have been coming under fire following a recent Wall Street Journal article which revealed conflict between Gross and former Co Chief Executive El-Erian.
InvestorPlace now reports that various clients have put PIMCO on “watch” or are considering pulling assets from the firm to minimize the impact of potential distractions in the boardroom. Indeed, PIMCO funds — especially Pimco Total Return Fund — have suffered outflows so far in 2014, despite bond funds in general experiencing renewed inflows.
So, if major advisers are bailing on PIMCO, does that mean you should too?
While most private investors do not own PIMCO mutual funds, due to their loadings the firm does offer a number of ETFs, including Pimco Total Return ETF (BOND), which still has nearly $3.5 billion in assets despite the recent outflows.
The question of whether you should abandon a fund really only comes down to one thing. How well is it performing. Investors, particularly private investors, don’t really care what’s going on in the background. So long as the fund keeps performing, they will forgive a multitude of sins.
So how have PIMCO funds fared since the crisis flared up in February? Daniel Putnam, from InvestorPlace has the answer here!
Todays Other Top Stories
Reuters: – Massachusetts to offer rolling retail muni bond sales via platform. – Massachusetts will begin selling general obligation bonds to retail investors for weeks at a time over an electronic trading platform on Monday, under a program that officials say is the first of its kind in the $3.7 trillion U.S. municipal bond market.
Market Realist: – Must-know market update: Is Puerto Rico losing its salsero vibe? – The charm of the island has been overshadowed with feelings of pessimism regarding the fiscally distressed state of the economy. The Puerto Rican government has been financing its deficits with bond issuances year after year, surmounting large amount of public debt, without paying much heed to accelerating the pace of revenue generation to meet the debt service obligations.
Investment News: – Muni bond fund rebound appears to have legs. – After an abysmal year in 2013, municipal bonds are back — and may offer positive returns for some time to come.
Crain’s Chicago Business: – What downgrade? Chicago sells $900 million in bonds. – Despite a recent downgrade in its credit rating, the city of Chicago saw surging demand yesterday for a big sale of bonds.
Businessweek: – Puerto Rico $3.5 billion deal takes up 33% of first-day trading. – Bonds from Puerto Rico’s record $3.5 billion general-obligation sale accounted for one-third of the trading volume of the entire $3.7 trillion municipal market on the day of their issue.
Wall St Cheat Sheet: – Beating Uncle Sam: 3 ways to invest tax-free. – Here’s a rhetorical question: who doesn’t want to reduce their tax bill? The famous saying is “death and taxes,” but while no one has found a way to cheat death, there are a couple of ways to cheat the Internal Revenue Service.
Fort Mill Times: – Fitch takes various rating actions on enhanced municipal bonds and TOBs. – Fitch Ratings has taken various conforming rating actions on enhanced municipal bonds and tender option bonds (TOBs) corresponding to actions taken on their associated enhancement providers or underlying bonds.
LearnBonds: – More choices for yield, thanks to the Fed taper. – One thing QE has accomplished – it’s driven down interest rates so much that it’s cut sharply into bond-buyers’ income stream, and they’re not going to rediscover that lost income in bonds for years.
Reuters: – Foreign central banks’ U.S. debt holdings sink. – Foreign central banks’ overall holdings of U.S. marketable securities at the Federal Reserve plunged in the latest week, with a particularly sharp drop in Treasuries, data from the U.S. central bank showed on Thursday.
MarketRealist: – The yield curve: An indicator of the monetary policy implications. – The yield curve is a line that plots the yields or interest rates (at a given point in time) of bonds having equal credit quality, but differing maturity dates.
MarketWatch: – Uncertainty pays in a white-hot corporate bond market. – Everyone and their mother seems to be piling into the white-hot corporate bond market these days, which means opportunities can be difficult to find. But for individual investors, one place to look may be a part of the market that the big dogs of the bond market tend to ignore.
WSJ: – Corporate cash pushes further into corporate bonds. – Companies continued to stash greater portions of their cash in corporate bonds last month, continuing January’s trend toward risk and higher yields.
Income Investing: – Corporate bonds weaken even as credit, rate risks remain muted. – The past week has been a tricky one for the corporate bond market, with not much new in the way of credit risk or interest-rate risk but corporate bonds still weakening thanks to geopolitical worries (Ukraine tensions, weak Chinese economic data, etc.) and a general risk-off attitude that hurt stocks in recent days.
What Investment: – High yield bonds may be ‘too expensive for the risk involved’, warn fund managers. – Despite a run of good performance, high yield bonds generally offer poor returns for the risks involved, two prominent bond fund managers have warned.
HighYieldBond.com: – High yield bond funds see fifth straight investor cash inflow ($573M). – Retail-cash inflows to high-yield funds totaled $573 million in the week ended March 12, according to Lipper. This is the fifth consecutive inflow, for a net infusion of $3.95 billion over that span.
Fidelity: – High yield: Is the party over? – The high-yield corporate bond market has had a spectacular run for nearly five years. Average annual returns have been near 15%, corporate balance sheets have strengthened, and default rates have dropped from the mid-teens during the financial crisis to between 2% and 3%. High prices and historically low yields might seem to indicate that high-yield fixed-income investors should start looking elsewhere. But not so fast.
Reuters: – Emerging bonds see first net inflows since Sept. – Inflows into emerging bond funds outpaced outflows last week for the first time since September, but equity funds saw net outflows for a record 20th week, banks said on Friday, citing EPFR data.
Investment Europe: – Corporate debt fastest growing part of EM debt universe, says Ashmore’s De Mones. – Alexis De Mones, head of Fixed Income at Ashmore, discusses the Emerging Markets corporate bond debt universe and why higher spread and lower duration characteristics in comparison to developed market credit indices offer one of the most compelling opportunities in global fixed income markets today.
USNews: The Warren Buffett guide to retirement investing. When investing for his wife, Buffett chooses index funds and government bonds.
Zacks: – 3 ETFs to play on Ukraine turmoil. – The global stock markets are seeing choppy trading thanks to the tension between Ukraine and Russia. All eyes are currently on Europe and the whole world is watching the impact of any development in the worst East-West standoff since the Cold War.
Trustnet: – Don’t expect equity-like returns from bonds. – Bond investing needs to be taken “back to basics”, according to BlackRock’s Ian Winship, who says that a lot of fixed income managers have been taking too much risk while investors are expecting far too high a return from their funds.
Reuters: – Bond funds worldwide attract $3.5 bln inflow – BofA. – Fund investors worldwide poured $3.5 billion into bond funds in the week ended March 12, reversing the prior week’s $1.8 billion in outflows, data from a Bank of America Merrill Lynch Global Research report showed on Friday.
ETF Trends: – Ultra-short-term bond ETFs as cash alternatives. – As investors plan for retirement, income generated from stocks and fixed-income positions will be used to cover short-term living expenses, or the revenue can be stashed away in a cash equivalent, such as ultra-short-term bond exchange traded funds.
ETF.com: – Tucker: Why the rise of bond ETFs matters. – While it’s not that surprising that large institutions are warming up to ETFs as they look for ways to execute their vision, it’s somewhat surprising why, the head of iShares’ fixed-income team Matt Tucker tells ETF.com.
Mather DepCIO: New Zealand 1st to raise rates in developd world. Centrl bank policies to diverge, driving asset mkts in different directions
— PIMCO (@PIMCO) March 14, 2014
— Brian Chappatta (@BChappatta) March 14, 2014
Unclear about chance of passage but Puerto Rico’s Restructure Act Public Corporations (poor translation) potential game changer
— Muni Market Advisors (@Muni_Mkt_Advis) March 14, 2014