Pimco mutual fund sees $9.9B in withdrawals in June

Investors in Pimco Total Return Fund, the world's largest mutual fund, withdrew a record $9.9 billion from the fund last month.

The withdrawals occurred as bond prices fell in anticipation that the Federal Reserve will soon scale back its purchases of bonds, one of its key measures to reduce long-term interest rates and stimulate the economy.

Pacific Investment Management Co., the Newport Beach, Calif.-based firm that runs Pimco Total Return Fund, provided the preliminary estimate to Morningstar Inc., the Chicago-based research firm said Tuesday in an emailed statement.

The withdrawals left the fund, run by well-known investment manager Bill Gross, with $268 billion in assets at the end of June, Morningstar said.

"Money really came out of core bond funds in June," Michael Rawson, an analyst with Morningstar said. "The market reacted to the Fed."

The withdrawals show the vulnerability of Pimco and other fund managers with a heavy weighting in bonds to a sustained decline in fixed-income markets. More than 90 percent of Pimco's $2.04 trillion in assets as of March 31 were in bonds.

Pimco Total Return lost 2.9 percent this year through Monday, trailing 87 percent of similar funds, according to data compiled by Bloomberg. It fell 2.5 percent over the past month, worse than 92 percent of comparable funds.

Gross and others have argued that the worst is over for bond investors.

Pimco Total Return is the most prominent fund to suffer withdrawals of money by investors, but it isn't alone. Investors withdrew $52.8 billion from bond mutual funds through June 24, according to TrimTabs Investment Research in Sausalito, Calif., surpassing the previous monthly record of $41.8 billion set in October 2008.

The 30-year bull market for bonds probably ended in late April as yields reached a low and prices peaked, Gross said in May.