Schwab Shuts Out Pimco After Bond Fund Says Outflow Slows

In a sign its problems are going mainstream, Charles Schwab Corp (NYSE:SCHW) has cut the Pimco Total Return Fund from its 10 target date funds, Reuters is reporting.

The review of Pimco was completed last week – a week that was capped by Pimco co-founder Bill Gross exiting the firm in startling fashion to join rival Janus Capital Group Inc (NYSE:JNS).

PIMCO’s capital outflows slowing down

The news from one of the leading discount brokerage firms serving mom and pop investors comes as Pimco was saying the rush of money out of its funds could be slowing. According to a press report, Pimco was touting the fact that its Pimco Enhanced Short Maturity exchange-traded fund, managed by Jerome Schneider, had taken in $71 million in new investor money since Gross left the firm last Friday.

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Pimco’s announcement comes just one day after investors yanked a record $23.5 billion from the flagship fund Gross operated, the fabled Pimco Total Return Fund. Pimco was reported as saying said “there were indications the bleeding had stopped” in the Pimco Total Return ETF, which experienced $22 million in investor redemptions yesterday.  The fund experienced 18 percent redemptions in September, distributing $631 million to investors who lost confidence in the fund in the wake of the controversy.

Pimco defenders note the outflows are relatively minor compared to the nearly $2 trillion of assets under management, half of which are said to be from the company’s parent, Allianz.

Bill Gross’s scandal impacts Allianz

The Gross scandal has had wide ranging impact.  Michael Diekmann, the chief executive of Allianz, stepped down today, according to a Wall Street Journal report, and reverberations both positive and negative are being felt throughout the asset management industry.

Gross had experienced growing friction from company executives, who noted his increasingly unusual public comments and blog posts and asked him to reduce such behavior.  An ongoing SEC investigation into misleading returns the fund posted only added to the tension.

Gross became infamous with financial insiders, who engaged in water cooler snickers as he wrote blog posts comparing a sneeze to a sexual orgasm and lamented the death of his gender bending cat named “Bob.”

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Mark Melin is an alternative investment practitioner whose specialty is recognizing a trading program’s strategy and mapping it to a market environment and performance driver. He provides analysis of managed futures investment performance and commentary regarding related managed futures market environment. A portfolio and industry consultant, he was an adjunct instructor in managed futures at Northwestern University / Chicago and has written or edited three books, including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008). Mark was director of the managed futures division at Alaron Trading until they were acquired by Peregrine Financial Group in 2009, where he was a registered associated person (National Futures Association NFA ID#: 0348336). Mark has also worked as a Commodity Trading Advisor himself, trading a short volatility options portfolio across the yield curve, and was an independent consultant to various broker dealers and futures exchanges, including OneChicago, the single stock futures exchange, and the Chicago Board of Trade. He is also Editor, Opalesque Futures Intelligence and Editor, Opalesque Futures Strategies. - Contact: Mmelin(at)valuewalk.com