A change in how Pacific Investment Management Co. accounts for reinvested dividends and capital gains helped the bond manager minimize an exodus of clients by about $18 billion last year.
PIMCO at the start of 2015 began counting such payouts as inflows, a departure from the way it used to report flows. The change, made as the firm was under pressure to stem a flood of redemptions following the departure of co-founder William H. Gross, has put a spotlight on a controversial issue among money managers — what to count as new money.
Competitors including Vanguard Group, Fidelity Investments, DoubleLine Capital, Legg Mason and J.P. Morgan all discount or exclude payouts that clients elect to leave in the funds. Others, such as BlackRock and Janus Capital Group, Mr. Gross’ new employer, roll such reinvestments into net flows.
PIMCO is under pressure to reverse client withdrawals and cut expenses after losing about 30% of managed assets since they peaked at $2.04 trillion in 2013. The firm’s parent, Allianz SE, last week appointed Jacqueline Hunt to lead asset management, replacing Jay Ralph.
PIMCO officials said they had been considering the change long before Mr. Gross departed, to align the firm’s methodology with other parts of Munich-based Allianz.
“Given the need for consistency and greater clarity, PIMCO decided to implement the change at the most responsible time for any accounting change — the start of the new fiscal year,” spokesman Michael Reid said in an e-mail. “While it’s true that PIMCO was under greater scrutiny from investors at that time, that made it all the more important to be consistent with the Allianz group in our approach.”
PIMCO had €16.6 billion of reinvested dividends and capital gains last year (equal to about $18 billion as of Dec. 31), Allianz said in a Feb. 19 presentation. Without that cash, PIMCO’s €125 billion in outflows would have been €141.6 billion, or 13% higher.
“I can’t speak to their actions directly, but a benefit of the change in reporting would be improved perceptions by investors,” Todd Rosenbluth, director of ETF and mutual fund research at S&P Global Market Intelligence, said in an e-mail. “Investors will see inflows or outflows as a sign of general confidence. So if you were considering putting money back into (a specific fund), you might be concerned that others were continuing to pull money out.”
Allianz disclosed the change in footnotes to earnings presentations starting with the first quarter of 2015, which ended six months after Mr. Gross’ exit. PIMCO cited the reporting switch this January, when it said its flagship Total Return Fund in December had its first net deposits since April 2013. It noted that the fund’s redemption streak would have extended to 32 months without the reinvested money.
More peers are implementing the same reporting approach, said Thomas Atkins, an Allianz spokesman, in an e-mail. “This is why Allianz made the move.”