(Updates with withdrawals from core fixed-income funds in fifth paragraph.)
Dec. 5 (Bloomberg) -- Bill Gross is taking over management of the Pimco Unconstrained Bond Fund, one of the firm’s most important offerings as clients pull out of its main bond funds, with current manager Chris Dialynas leaving on a sabbatical.
The transition from Dialynas, who has been at Pacific Investment Management Co. since 1980 and has run the $28 billion Unconstrained Bond Fund since 2008, to Gross is effective today, according to a regulatory filing by the Newport Beach, California-based firm. Dialynas, 59, has taken a sabbatical earlier during his career at Pimco, said Mark Porterfield, a spokesman for the firm.
Pimco Unconstrained Bond Fund is benefiting from investor demand for bond funds that can invest anywhere, despite lackluster returns. The fund, which has trailed more than three- fourths of similarly managed rivals this year, attracted $10.2 billion in the 10 months through October, the most of all Pimco funds and non-traditional bond funds tracked by research firm Morningstar Inc. That has helped the firm limit client defections as Gross’s Pimco Total Return is on track to have its worst year of redemptions with an estimated $36.9 billion pulled through Nov. 30, according to Morningstar estimates.
Pimco Unconstrained Bond Fund can invest across an array of fixed income, regardless of maturity, credit quality or region. Under Dialynas, the unconstrained strategy returned an annualized 5.2 percent over the past five years, worse than 83 percent of peers, and fell 2.1 percent this year, behind 75 percent of rivals, according to data compiled by Bloomberg. Gross’s Pimco Total Return, which was the world’s largest mutual fund until October, has declined 1.4 percent this year, trailing more than half of its peers.
Investors are seeking non-traditional bond strategies and withdrawing money from core fixed-income funds as they anticipate an increase in interest rates. They pulled $65.1 billion from intermediate-term bond funds this year through Oct. 31, while depositing $48 billion into non-traditional strategies, Morningstar said. Other money managers, such as BlackRock Inc. and Legg Mason Inc.’s Western Asset Management Co., have highlighted the benefits of more flexible bond funds and also offer unconstrained strategies.
In addition to the $244 billion Pimco Total Return Fund and its associated strategies, Gross, 69, is the manager of the Harbor Bond Fund, Pimco’s Moderate Duration Fund, Low Duration Fund, StocksPlus funds, and several closed-end funds. He also oversees an exchange-traded fund that follows a similar strategy to the Pimco Total Return Fund.
--With assistance from Charles Stein in Boston. Editors: Sree Vidya Bhaktavatsalam, Josh Friedman