By Jennifer Ablan
NEW YORK (Reuters) - Jackson National, the largest U.S. provider of variable annuities, said in a filing on Tuesday it plans to remove Pimco's Total Return Bond investment strategy from Jackson National's product line-up and assign management of the $3.5 billion in that fund offering to Jeffrey Gundlach's DoubleLine Capital.
The move would end Jackson National's nearly two decades of using Pimco's flagship Total Return investment strategy, although Jackson still offers the JNL/Pimco Income Fund and the JNL/Pimco Real Return Fund. The Jackson National introduced the JNL/Pimco Total Return Bond as a sub-account option in its variable annuity product line in 1998. The investment option is to be renamed the JNL/DoubleLine Core Fixed Income.
The $3.5 billion mandate would considerably increase assets in portfolios run under DoubleLine's core-related fixed-income strategies. Core-type assets totaled $12 billion of $105 billion in assets under management at DoubleLine as of March 31.
Pimco and DoubleLine declined to comment. Calls to Jackson National were not returned.
It remains to be seen how many investors would stay once JNL/DoubleLine Core Fixed Income - an intermediate-term bond fund that invests in different sectors of the fixed-income markets, including corporate securities, emerging markets debt and MBS - gets up and running.
Legendary bond investor Bill Gross left Pimco in September 2014, eight months after second-in-command Mohamed El-Erian quit after the two clashed over how to run the Newport Beach, California-based Pimco. Gross now runs the $2 billion Janus Global Unconstrained Bond Fund.
"Institutional investors tend to be more patient than retail, but in the nearly three years since the Bill Gross departure from Pimco, the Total Return fund’s performance relative to its Lipper peers has stabilized," said Todd Rosenbluth, director of ETF & Mutual Fund Research at CFRA.
"However, fund assets remain significantly lower as the firm has not been able to win back investor attention. DoubleLine’s fixed income products have performed well under unchanged management over the last five years."
Although much smaller in asset size, the $8.8 billion DoubleLine Core Fixed Income Fund has been growing strongly whereas its much larger Pimco Total Return counterpart, with $73.8 billion in assets, has only recently shown signs of stabilization after outflows reduced its size to a quarter of its all-time high of $293 billion in mid-2003.