Pimco, the world’s largest credit-focused investment manager, lost 29 billion euros in net outflows in the second quarter as a sell-off in the bond market pushed investors out.
The California-based manager’s outflows, disclosed on Friday, followed the 14 billion euros drawn in by investors in the first quarter. Citi analysts said in a note that cash outflows from Pimco in the three months to the end of June were “significantly higher than expected.”
Investors are watching the fortunes of Pimco, held by Germany’s Allianz, closely as a deteriorating global economy sucks the life out of the 30-year bond market boom.
Pimco and its peers are trying to navigate an environment where the highest level of inflation in a generation is eroding the value of their bond holdings. The bond market sell-off also reflects concerns about the impact of Russia’s war in Ukraine on global economies.
“Obviously the market has been tough,” Allianz chief financial officer Giulio Terzariol said Friday. But he said fixed income managers everywhere had exits and July showed signs of the market stabilizing.
Overall, Allianz’s third-party assets under management fell by €109 billion in the quarter to €1.8 billion. Outflows in the group’s investment activities amounted to €34 billion, while market movements took a further €110 billion from the group’s assets under management, partly offset by currency effects .
Allianz, which focuses on insurance and asset management, posted operating profit of 3.5 billion euros, just above analysts’ expectations. The net result is down slightly compared to forecasts due to a drop in the group’s investments.
The group’s property and casualty division performed well on the back of lower natural disaster claims bills and higher commercial insurance rates. This made it possible to offset the weaker performance of the asset management division.
The company has made no additional provision for the $6 billion settlement it agreed to with US authorities earlier this year following a scandal at its US funds business, part of its arm. Allianz Global Investors. It was a securities fraud that left investors with billions of dollars in losses.
The settlement came with a regulatory ban on Allianz providing certain US fund services, prompting it to transfer them to investment firm Voya under a partnership agreement.
That meant about 100 million euros in restructuring expenses in the second quarter, which Terzariol said included about 200 layoffs. He estimated that “perhaps a billion” of Allianz Global Investors outflows could be linked to the episode.
Allianz’s net profit attributable to shareholders for the first six months of the year was halved following the settlement, to 2.3 billion euros.
Jefferies analysts described the results as a “modest, albeit shoddy” earnings beat, but noted lower assets under management and lower life and health insurance revenue.
A pioneer in active bond trading, Pimco is also grappling with the rise of cheap index funds, run by BlackRock and Vanguard, which has led some investors to question the fees they pay active managers.
Pimco chief executive Emmanuel Roman and chief investment officer Daniel Ivascyn have looked to alternative strategies to diversify the fund manager. These include direct lending, aircraft leasing, real estate, and pop song catalogs.