PIMCO loses world's largest fund title to Vanguard index tracker

Bill Gross

Bill Gross no longer runs the world's largest mutual fund.

Mr. Gross' PIMCO Total Return fund has shrunk by $37.5 billion since the start of this year, ending last month with $247.9 billion in assets, according to data provided by Pacific Investment Management Co. and compiled by Bloomberg. The Vanguard Total Stock Market index fund ended October with $251 billion, Vanguard Group spokesman John Woerth wrote in an e-mail, taking the top spot.

PIMCO Total Return, which became the biggest mutual fund in 2008, is on track to have the worst redemptions ever this year, losing $28 billion through Sept. 30, according to estimates from Morningstar. Investors are pulling money out of traditional fixed-income funds in anticipation that the three-decade rally in bonds is ending, and adding to stock funds, particularly low-cost index funds, as the bull market in U.S. equities is in its fifth year.

“This is emblematic of the surge in popularity of index funds,” Mr. Woerth wrote in the e-mail.

PIMCO spokesman Michael Reid declined to comment in a telephone interview. Mr. Gross and Mohamed El-Erian, the co-chief investment officers of PIMCO, didn't return e-mailed requests for comment.

Investors started to flee bonds this year on concerns that the Federal Reserve will taper its bond-buying program, which could lead to higher interest rates and a decline in fixed-income security prices. Stocks have rallied on rising corporate earnings and forecasts that the U.S. economy will accelerate in 2014.

U.S. bond mutual funds saw net redemptions of $117 billion in the four months through September, while stock funds received $35 billion, according to the Investment Company Institute.

PIMCO Total Return lagged behind 56% of its peers this year and outperformed 77% over the past five years, according to data compiled by Bloomberg.

The Vanguard fund was buoyed by a 27% return in the CRSP U.S. Total Market index this year, a benchmark that includes stocks of different market capitalizations.

Vanguard, the biggest U.S. mutual fund firm, with almost $2.4 trillion in U.S. fund assets, has grown as the champion of indexing. Index funds represent 63% of Vanguard assets, Mr. Woerth said.

Vanguard Total Stock Market index fund has more than tripled in size since the end of 2008.