ScholarShare, California's 529 college savings plan, on Friday terminated PIMCO's Total Return Fund, said a news release from Bill Lockyer, California state treasurer, who chairs the plan's investment board.
ScholarShare had $262 million in the PIMCO fund.
The move by the $6 billion Sacramento-based plan is in response “to recent organizational changes at PIMCO, including co-founder Bill Gross' departure, and the resulting uncertainty surrounding the Total Return Fund, which Gross managed,” the release said.
“ScholarShare moved the $262 million into the TIAA-CREF Bond Plus Fund Institutional Share Class, which has a risk-return profile similar to the Total Return Fund's,” the release said. That is a new option for the fund.
“ScholarShare continues to hold assets in two other PIMCO funds: $111.3 million in the Income Fund and $92.8 million in the Real Return Fund,” the release said. Those funds are “on 'watch' status, which means ScholarShare will continue to closely monitor them,” it said.
Tom Dresslar, spokesman for the treasurer's office, said the three PIMCO funds were not on watch before Mr. Gross' departure.
“PIMCO is a top-echelon California company,” Mr. Lockyer said in the release. ”And we're confident it will emerge from the shakeup even stronger. But ScholarShare has a duty to protect the college savings of the thousands of families who have placed their money, and trust, in the program. This action fulfills that duty and honors that trust.”
Pension Consulting Alliance, the plan's investment consultant, recommended “transitioning these mandates to new management,” according to an Oct. 1 PCA memorandum to the investment board. “At minimum, PCA recommends that clients put PIMCO on 'watch' at the organizational level,” because of Mr. Gross' departure. “His departure, therefore, is a watershed event,” the memo said. “He touched most, if not all, of the fixed-income strategies run by the firm,” the PCA memo said. “We believe this transition is material.”
