Bonds' Big Boys Can't Get a Break
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Friday, August 23, 2013

Bonds' Big Boys Can't Get a Break

The tapering is coming! Batten down the hatches!

The bond fund market fears continue, and though outflows have moderated they are still high, with $30 billion leaving U.S. registered bond mutual funds and ETFs this month, reports Bloomberg's Lisa Abramowicz and Christopher Condon.

Bond funds and ETFs could have their slowest year since 2004, as withdrawals through August 19 are the third-highest outflows on record, it is a significant improvement from $69 million in withdrawals in June, Abramowicz and Condon report.

Of course, the investor exodus has hit some of the most prominent bond fund managers, including PIMCO'sBill Gross, and DoubleLine's Jeffrey Gundlach.

“These outflows mark an enormous shift for the bond world,” research firm TrimTabs states in a report quoted by the reporters. “A vicious circle of losses and redemptions as the bond binge unwinds could get nasty.”

Abramowicz and Condon note that clients pulled an estimated $7.4 billion from Gross’s Newport Beach, California-based Pimco in July, according to research firm Morningstar Inc. Gross’s Pimco Total Return Fund (PTTRX) has declined 3.6 percent this year, trailing 73 percent of competing funds.

DoubleLine, based in Los Angeles, lost $631 million to redemptions in the same month. Gundlach’s $37.3 billion DoubleLine Total Return Bond (DBLTX) Fund has fallen 1.1 percent this year, beating 86 percent of rivals.

Abramowicz and Condon point out that stock funds lost $11.3 billion through August 19, despite record inflows of $39.2 billion in July. Stock funds investing outside the U.S. did pretty well, however, bringing in $13.2 billion during the same period. Not too shabby.

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