By Sam Forgione
NEW YORK (Reuters) - Investors pulled $3.2 billion from the Pimco Total Return Fund, once the world's largest bond fund, in December, bringing last year’s total cash withdrawals to $16.1 billion, Morningstar data showed on Friday.
The Pimco Income Fund, which Pimco Group Chief Investment Officer Dan Ivascyn told Reuters on Friday has increased its exposure to safer securities in recent weeks, posted net inflows of $1.5 billion last month for a total cash inflow of $13.7 billion in 2016.
Pimco's U.S. open-end mutual funds collectively posted $1.7 billion in net outflows last month for 2016 total cash outflows of $16.6 billion.
Pimco Total Return, which hit a peak of $292.9 billion in assets under management in April 2013, now has $75.7 billion in assets. The Income Fund, overseen by Ivascyn and widely seen by investors and analysts as Pimco's new flagship fund, now has assets under management of $70.3 billion, according to Morningstar data.
Last year, the Pimco Total Return Fund returned 2.6 percent, lagging 63 percent of its intermediate-term peer category, according to Morningstar. For the same period, the Pimco Income Fund returned 8.3 percent, surpassing 63 percent of its multisector bond category.
In December alone, the Total Return Fund gained 0.7 percent to beat 94 percent of its peers, while the Income Fund gained 1 percent to beat 61 percent of its peers, Morningstar data showed.
The Pimco Income Fund's exposure to higher-quality securities such as U.S. Treasuries, U.S. agency mortgages, and Australian government bonds has risen significantly in the past several weeks while the fund's exposure to riskier U.S. corporate bonds has fallen, Ivascyn said.
Ivascyn said that move had been implemented given uncertainty surrounding U.S. President-elect Donald Trump's policies and because the market seemed to be factoring in an extremely low probability of recession and other sources of volatility.
"We think U.S. Treasury bonds, high-quality bonds, are priced more fairly than at any point in the last year or so," he said. Ivascyn said that, despite Treasuries being fairly priced currently, the benchmark 10-year yield could still rise to the low 3 percent range over the next 12 months.
U.S. 10-year yields, which hit a more than two-year high of 2.641 percent in mid-December, were last at 2.419 percent.
Pacific Investment Management Co, a unit of German insurer Allianz (DE:ALVG) SE, is based in Newport Beach, California. It had about $1.55 trillion in assets under management at Sept. 30.