Pimco Sees €13.6 Billion Outflows Amid Bond Selloff
May 14, 2022
(Bloomberg) — Pacific Investment Management Co. saw outside clients pull money for the first time since the onset of the pandemic as investors fled fixed-income securities amid rising interest rates.
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The giant bond manager watched 13.6 billion euros ($14.3 billion) go out the door in the first quarter, contributing to a 4.5% drop in outside money overseen at Allianz SE’s asset management businesses. The outflows — mainly from fixed income but some also from equities — were the first quarterly net redemptions for Pimco since the start of 2020, when investors pulled 43 billion euros.
The results reflect a challenging beginning to the year for asset managers, as a global market rout saw the S&P 500 Index post its worst first four months of a year since 1939, while the bond market selloff continued amid aggressive monetary tightening. Allianz Chief Financial Officer Giulio Terzariol said he expects Pimco’s outflows to continue for now and turn into inflows once interest rates stabilize on a higher level.
“The outflows at Pimco are not surprising” and overall “pretty moderate,” Terzariol said in an interview with Bloomberg Television.
Allianz shares fell 3.2% at 5:21 p.m. in Frankfurt trading, bringing the total decline this year to 4.4%. Citigroup Inc. analyst James Shuck said Pimco’s outflows were higher than expected.
Pimco also had billions of dollars of exposure to Russia but has marked down all positions significantly, according to a spokesman.
Allianz is considering exiting its insurance operations in that country, Terzariol told reporters on a call, adding there was a “very high” likelihood of such a move after the company had already stopped doing new business in Russia. That would mean a hit of between 400 million euros and 500 million euros to the profit and loss statement, without implications for the company’s solvency or cash position, according to a presentation.
In a bright spot, Pimco’s smaller sister unit Allianz Global Investors saw outside clients add 4.6 billion euros, a sign that high-profile hedge fund losses at the business haven’t hurt investor demand. The inflows were driven by multi-asset strategies and other asset classes except fixed income.
Allianz has set aside an unprecedented 5.6 billion euros to resolve investor lawsuits and regulatory probes after the collapse of AGI’s Structured Alpha hedge funds. The U.S. Department of Justice and the Securities and Exchange Commission are still looking into the matter, the company has said.
Terzariol said while the provisions taken should cover agreements with investors as well as with the government, the final implications of the debacle for AGI will depend on the outcome of the government proceedings. He declined to say what the potential consequences for the business might be.
Allianz’s total third-party assets under management stood at 1.88 trillion euros at the end of March, down from 1.97 trillion euros at the end of December. That reflected mostly market swings and combined outflows of 9 billion euros at AGI and Pimco.