Pimco: We’re cutting expenses on our funds
El-Erian & Co getting into the brokerage biz (Bloomberg News)
Bond fund giant aims to boost fledgling brokerage – and snag more assets – by lowering expense ratios
Pacific Investment Management Co. LLC is planning to cut expenses on retail shares of its funds in coming months as part of its effort to woo financial advisers and their clients.
The asset manager, which is a subsidiary of Allianz Global Investors, is awaiting regulatory approval to set up its own broker-dealer. Once its brokerage is launched, the firm will have sole ownership of the distribution of its funds.
“Individual investors are becoming even more important, and we feel that to provide our clients with the best investment experience, this is a natural evolution,” said Jon Short, chairman and managing director of Pimco’s new B-D, Pimco Investments.
The brokerage is expected to get regulatory approval by the end of March. To help prime the pump with advisers, Pimco plans to reduce the costs of its funds. And since Pimco will have control over its fund administration and distribution, the company expects to be able to lower costs on its funds within the next six months, Mr. Short said.
The timing could be crucial. With equity markets expected to surge in 2011, lower prices could prove to be crucial if Pimco aims to gain assets. While the fixed-income giant did remarkably well in the years after the financial market meltdown, bonds have falling out of favor lately. That could have investors scrutinizing bond funds more closely. Many may notice that some of Pimco’s funds are more expensive than their peers, said Russel Kinnel, director of research at Morningstar Inc.
For example, the average expense ratio for Pimco’s inflation-protected-bond funds is 1.19%, compared with 1.01% for its peers, according to Morningstar. The average expense ratio for Pimco’s intermediate-term-bond funds is 1.22%, compared with 1.13% for its peers.
D shares of the $240 billion Total Return Fund have $18 billion in assets, while A shares have $26 billion.
“There is more money there if they want to be more aggressive in pursuing it,” Mr. Kinnel said.
Mr. Short and Mr. Hodge declined to comment on how much they will cut expenses on Pimco’s funds.
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