Pimco Income Expands to Largest Active Bond Mutual Fund

(Bloomberg) -- Dan Ivascyn's Pimco Income Fund keeps raking in money.

The fund, co-managed by Ivascyn and Alfred Murata, celebrates its 10th anniversary this week by becoming the largest actively managed fixed-income mutual fund with $79.1 billion, according to Pimco's website Tuesday. Pimco Income passed Metropolitan West Total Return Bond Fund as investors added approximately $3 billion in March, a monthly record, according to estimates by Bloomberg.

“Our investment process and active management have produced significant gains for our clients and we believe the current environment will continue to present more opportunities for investors who actively pursue them,” Ivascyn, 47, said in an emailed statement.

Pimco Income is winning cash at a time when many investors are fleeing active funds because of higher fees and lower performance. Ivascyn's main fund led actively run stock and bond funds in attracting deposits in 2016 and has outperformed 99 percent of its Bloomberg peers for the last three- and five-year periods.

The MetWest fund managed $78.9 billion as of April 3. A spokesman for the company declined to comment.

New Era

The Pimco fund is now the third-largest fixed-income fund, behind the passive Vanguard Total Bond Market Index Fund and Vanguard Total Bond Market II Index Fund. They had $143.8 billion and $121 billion in assets, respectively, as of Feb. 28, according to Bloomberg data.

Pimco Income's growth represents the new era at Pacific Investment Management Co. since the September 2014 exit of Bill Gross, the Newport Beach, California-based firm's co-founder whose acrimonious departure prompted a surge of outflows. Ivascyn replaced Gross as chief investment officer, and last year the company hired Emmanuel Roman from Man Group Plc as chief executive officer.

Pimco Income, which returned an average of 8.5 percent annually over the last five years, invests in a range of mortgage-backed securities, government and corporate debt and derivatives.

The fund has two parts, with higher-yielding securities to generate returns during strong growth periods balanced by better-quality securities that fuel returns at weaker times, according to a note Tuesday by Todd Rosenbluth, director of ETF and mutual fund research at CFRA, who gives Pimco Income a top rating and says its size doesn't appear to be a problem.

“Despite the fund's $100 billion in assets under management overall, including outside of the mutual fund structure, Ivascyn thinks the broad-based mandate and macro-driven approach enables his team to still have room to manage more assets without needing to close the fund to new investors,” Rosenbluth wrote.

Pimco Income in February surpassed the Pimco Total Return Fund, which Gross founded in 1987 and built to become the world's largest mutual fund, with $293 billion at its peak in April 2013. Total Return has continued to face redemptions since Gross's exit, falling to $73.6 billion as of March 31, even as its performance has recently improved.

--With assistance from Andrew Bachmann and Charles Stein

To contact the reporter on this story: John Gittelsohn in Los Angeles at johngitt@bloomberg.net.

To contact the editors responsible for this story: Margaret Collins at mcollins45@bloomberg.net, Josh Friedman, Rob Golum