Bill Gross, the transgender cat-loving executive engaged in serious short volatility plays in China, must be watching in agony as investment funds continue to flee from his flagship fund.


PIMCO Total Return Fund’s net outflows and inflows

Jennifer Ablan from Reuters is reporting the PIMCO Total Return fund, the world’s largest with Gross at the helm, had net outflows of $830 million in July.  The loss for the fund marks the 15th straight month of outflows.  The PIMCO Total Return EFT has seen net inflows of $43 million over the past two months, it should be noted.

During the past 15 months, Gross and PIMCO have undergone monumental turmoil.

As talk that the largest rally in bonds was coming to an end was said to permeate discussions among bond traders, Gross found himself in an un-winnable battle with his “partner” in business and apparent successor Mohamed El-Erian that revealed some long simmering issues regarding control and ego management inside PIMCO.

As reported by ValueWalk on February 25, when Mohamed El-Erian left Pacific Investment Management Company in January, it was amidst what appeared to be a cat fight among two of the world’s most respected investment professionals.

When El-Erian announced he was leaving, ValueWalk wrote that many market observers, including “Bond King” Bill Gross, touted the end of a 30 year bull run in bonds. In other words, the going might get rather difficult for PIMCO’s flagship product, the PIMCO Total Return Fund. As noted in ValueWalk, PIMCO’s returns have recently fallen short of industry averages and key competitors.

The investment philosophies of Bill Gross and Mohamed El-Erian were a study in contrast.  As Gross lamented the future potential for bond appreciation, he began to dabble in aggressive alternative strategies much to the chagrin of El-Erian, much more of a “worry wart” traditionalist.

PIMCO’s strategies

PIMCO has engaged in what can be considered aggressive strategies for a bond fund, involved in Chinese over the counter derivatives as well as tending to prefer investing with exchange traded bond derivatives over purchasing actual bonds. While these strategies have been successful to date, the reality is the mere mention of the word “derivative” is often enough to shake an investor’s confidence (and raise suspicion of derivative unfriendly financial advisors to which PIMCO markets).

In April of this year, PIMCO Bond Fund were downgraded by Morningstar while the firm’s Commodity Plus Strategy received an upgrade.