Note: Profile written for different share class.

Summary

The world’s largest bond fund has seen outflows for more than a year straight, despite improving performance. Most of that began in 2013 when the fund showed weak performance and lost its co-chief investment officer, Mohammed El-Erian. The fund has made slight gains recently but is still trailing its peers for the year.

As of February 04, 2015, the fund has assets totaling almost $143.36 billion invested in 16,789 different holdings. The fund invests primarily in intermediate-term and investment-grade bonds. Despite turnover in the fund’s management team, analysts remain sweet on the fund’s future. Since January 2014, PIMCO’s CEO and co-CIO Mohamed El-Erian resigned coupled with the appointment of six new deputy CIOs. According to Eric Jacobson, a senior analyst with Morningstar, “while the Investment Committee has changed, it looks more balanced now, boasting new sector-level experts to complement a macro focus that had dominated.”

Just under a third of the fund’s holdings are in government bonds. The category average is slightly above one third. Corporate bonds make up more than 26 percent of the fund. Securitized loans (such as mortgages), municipal bonds, cash and other make up the remaining part of the fund’s holdings. The fund invests in instruments that have varying maturity and can include more exotic trading strategies based on derivatives, options and futures contracts or swap agreements. The fund has returned 6.02 percent over the past year and 4.28 percent over the past three years.

The PIMCO Total Return Fund has provided a solid, although not stellar, return for investors over the past decade, and Morningstar named Gross and his team Fixed-Income Manager of the Decade for 2000 to2009. The fund has returned 5.32 percent over the past five years and 6.23 percent over the past decade.

Investment Strategy

The fund gives investors an actively managed core bond portfolio within a variety of sectors of the fixed income market. PIMCO states that the portfolio is of high quality bonds that are actively managed to maximize return in a risk-controlled framework.

Morningstar says that despite the upheavals in management, PIMCO provides a “world-class offering.”

Role in Portfolio

Morningstar assigns the fund a core role in portfolio.

The fund is managed by William Gross, a founder and co-CIO at PIMCO. But there have been challenges. PIMCO’s CEO and co-CIO Mohamed El-Erian resigned in January and departed in mid-March 2014. The firm also named six deputy CIOs, including Andrew Balls, Dan Ivascyn, Mihir Worah, Mark Kiesel, Scott Mather, and Virginie Maisonneuve.