'Pimco's days at the top with Total Return are over'

Pimco will never regain its crown as manager of the world's largest bond fund, say experts, who believe the US fixed income house is more likely to lose its second spot than recover pole position.

Turmoil sparked by the sudden exit of Bill Gross last year has cost the Pimco Total Return fund its almost two-decade title as the biggest bond mutual fund, after another month of withdrawals in April.

In two years the fund has shed $183bn of assets and now stands at $110bn. The Total Bond Market Index fund, run by low-cost provider Vanguard, has grown to $117bn.

One former Pimco employee told FTfm: "Pimco's days at the top with Total Return are over. The planets were aligned to put them there but now the world is very different."

Bruno Crastes, Credit Agricole Asset Management's former head of fixed income and now co-founder of H2O Asset Management, added: "There is a much higher chance Total Return fund's assets will fall again and that it loses its second spot than it regains first place."

Pimco declined to comment.

Under Mr Gross, dubbed the Bond King for his decades of successful investing, Pimco Total Return's assets peaked at $293bn in April 2013. Mohamed El-Erian, co-chief investment officer of Pimco, left in January 2014 amid tales of confrontations with Mr Gross, who departed for Janus Capital in September.

Jake Moeller, a fund analyst at Lipper, the data provider, agreed it was highly unlikely the Total Return fund would hit $293bn again. "There is so much competition in fixed income now compared to when Pimco was launched. Institutional investors, particularly, allocate smaller amounts to a greater number of fund managers to diversify business risk. The attraction of smaller funds is higher now than it was," he said.

Total Return's April redemptions were its smallest monthly outflow since Pimco managers moved to oust Mr Gross as chief investment officer. The California-based bond house has since worked hard to overhaul its operations and last month hired Ben Bernanke, former chairman of the Federal Reserve, as an adviser.

Amin Rajan, chief executive of Create Research, a fund consultancy that has long counted Pimco among its clients, said: "The fund can get back to its $293bn asset high if two conditions prevail. First, the fund's performance improves markedly. Second, the 30-year bull market in bonds does not explode in the near future.

"The world of investing is cyclical and self-correcting. Nothing is set in stone. There is no reason why the Total Return fund cannot regain the crown."

Michael Herbst, director of manager research at Morningstar, who monitors Pimco on behalf of the research provider, added: "I would not rule anything out; we have seen active and passively managed funds grow and shrink over time."

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