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Rating:It Takes a Village ... To Stage a Mutual Fund Firm Comeback Not Rated 0.0 Email Routing List Email & Route  Print Print
Monday, April 20, 2015

It Takes a Village ... To Stage a Mutual Fund Firm Comeback

News summary by MFWire's editors

Capital Group and Pimco [profile] have both had some rough times as of late. Now it's time for some comebacks, team-style.

Cap Group's American Funds [profile] (now $1.199 trillion in total assets under management as of March 31, 2015) suffered $251 billion in outflows post-financial crisis, yet its inflows are turning around. Trevor Hunnicutt of InvestmentNews highlights new Morningstar data that show the Los Angeles-based mutual fund shop bringing in $5.9 billion in net inflows over the last six months (leading up to March 31, 2015), including $2.165 billion in the last month alone. For the first time since 2008, American Funds has positive net inflows for two quarters in a row.

As for Pimco ($360 billion in AUM as of March 31, 2015), major outflow woes are more recent, largely following the departure of star PM Bill Gross in September 2014. The flood has slowed but has not disappeared (it's still about $10 billion per month). Yet Lisa Shidler of RIABiz talks to Michael Herbst, Morningstar's director of manager research for fixed income strategies, who says that Pimco's investment process "is probably healthier now than it was before."

"We expect and hope to see outflows really taper off by the third or fourth quarter," Herbst tells RIABiz. "We believe most of the redemptions from individuals are over and we believe most of the outflows from institutions are over. The wild card is the defined contribution space."

What's behind these budding Pimco and Cap Group comebacks? InvestmentNews reminds readers that advisor-sold Cap Group recently boosted its external wholesaling force by 25 percent. It has new global and international funds, two of which have taken in $6.2 billion in the past 12 months, even as old favorites like Capital World Growth & Income and Growth Fund of America suffered continued outflows. And the formerly quiet Cap Group team is speaking out publicly more than ever before, making the case for their long-term, team-based, actively-managed style of investing.

At Pimco, the flagship Total Return Fund ($117.4 billion in AUM as of March 31, 2015) has strong returns in its first six months post-Gross. And Herbst points out to RIABiz that Pimco's investing talent is running out the door.

"We haven't seen many senior level investment personnel leave since Bill Gross," Herbst tells the trade publication. "You've seen a handful of departures but the team is largely intact and the process is largely intact."

That team emphasis is a common chord now for both firms' turnaround efforts. Cap Group has long avoided having star PMs (its team approach is about as far away from star-driven as can be). And Pimco has shifted towards a team-based approach as well, with three chief investment officers now jointly running Gross's old flagship fund. That's just more fuel for the rumors of the death of the star PM. 

Edited by: Neil Anderson, Managing Editor

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