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What 'New Normal ?' El-Erian's Pimco Fund Falls Flat
Reply to @ducrow: The guy seems focused on telling everyone about the relevations that a tomatoe is a fruit, but can't seem to put a decent fruit salad together. I'll eat elsewhere.
I often agree with El-Erian and I thought his book was an enjoyable read. I think my issue with that fund is that I question his level of involvement, which I think is probably minimal.
Reply to @Chinfist: That's really interesting and makes me want to watch this fund a little again.
"El-Erian, who is Pimco’s co-chief investment officer along with Bill Gross, will select investments for the $3 billion fund effective at the end of this month, along with his current role providing strategic guidance, "
"Strategic guidance" (a very elegant way of saying he pops his head in the door on occasion) is pretty much what I thought his involvement was.
If he now is going to take an active role in investment selection (and this sorta confirms he wasn't), I find that compelling. I know there are going to be people who won't because of some of Pimco's views, but personally, if it becomes very clear that this change IS taking place, I might take a real look at this fund again.
The fund was expected to underperform during up markets, given its use of hedges. What was surprising was that it did not outperform during downdrafts/corrections in the last 3-4 years. It could well be that it truly outperforms only in the wake of tail risk type events -- we haven't had any of those for some time.
FOOL ME ONCE - SHAME ON YOU - FOOL ME TWICE - SHAME ON ME - I WILL TAKE A PASS ON THIS FUND EVEN IF THEY SAY EL-ERIAN IS MORE INVOLVED IN THE FUND - I THOUGHT HE WAS INVOLVED IN THE FUND WHEN I BOUGHT IT IN 2008!!!!!
I held the A share version of this fund PGMAX in the growth & income area of my portfolio in its global hybrid sleeve. I let it go, a couple years ago, for lagging performance reasons and I also held a sister fund, All Asset (PASAX), in my hybrid income sleeve. There has been a good number of post on All Asset this year as it has disapointed a good number of investors including myself, although I still own it. Thus far this year it is trailing the other funds in its sleeve and PGMAX is performing even worse trailing PASAX by a wide margin. In addition, I owned All Asset All Authority (PAUAX) and I let it go this past year.
No, I don't think I'll be venturing back into PGMAX anytime soon as I feel CAIBX, IGPAX and TIBAX are much better funds, at least, for me. And, I am not happy with PASAX's performance this year either ... and, it might soon be history at years end. I am looking at BAICX and/or JNBAX as a replacement.
It seems a good number of Pimco's funds have lost their midas touch. It for sure these three have.
Not sure his involvement will help the performance. The underperformance seems to be due to two elements of the fund's strategy: 1) The use of tail risk hedges -- does not help in a steady bull market 2) Asset allocation that overweighted commodities and emerging mkts and underwighted U.S. equity markets (vs. the standard 60/40 balanced fund).
I suspect similar factors also explain some of the underperformance of risk parity funds and Yale-style endowment funds.
I may be the outlier here but I don't think this is a necessarily a bad way to access the underlying strategy - just that the fund opened and operated in a market cycle which does not mesh with the fund's strategy.
You are right to feel cheated as they did not disclose that fact. I think this is actually common in the industry: stars listed as manager in funds even though they have minimal involvement. I think Royce funds is probably a prime example.
Comments
http://www.bloomberg.com/news/2013-11-16/el-erian-said-to-expand-role-at-slumping-multi-asset-fund.html
"El-Erian, who is Pimco’s co-chief investment officer along with Bill Gross, will select investments for the $3 billion fund effective at the end of this month, along with his current role providing strategic guidance, "
"Strategic guidance" (a very elegant way of saying he pops his head in the door on occasion) is pretty much what I thought his involvement was.
If he now is going to take an active role in investment selection (and this sorta confirms he wasn't), I find that compelling. I know there are going to be people who won't because of some of Pimco's views, but personally, if it becomes very clear that this change IS taking place, I might take a real look at this fund again.
Interesting that this fund has $3B AUM.
No, I don't think I'll be venturing back into PGMAX anytime soon as I feel CAIBX, IGPAX and TIBAX are much better funds, at least, for me. And, I am not happy with PASAX's performance this year either ... and, it might soon be history at years end. I am looking at BAICX and/or JNBAX as a replacement.
It seems a good number of Pimco's funds have lost their midas touch. It for sure these three have.
I wish all ... "Good Investing."
Old_Skeet
1) The use of tail risk hedges -- does not help in a steady bull market
2) Asset allocation that overweighted commodities and emerging mkts and underwighted U.S. equity markets (vs. the standard 60/40 balanced fund).
I suspect similar factors also explain some of the underperformance of risk parity funds and Yale-style endowment funds.
I may be the outlier here but I don't think this is a necessarily a bad way to access the underlying strategy - just that the fund opened and operated in a market cycle which does not mesh with the fund's strategy.
You are right to feel cheated as they did not disclose that fact. I think this is actually common in the industry: stars listed as manager in funds even though they have minimal involvement. I think Royce funds is probably a prime example.