15
Morningstar FundInvestor
July 2
014
not up to the official
2
.
00%
Fed target. By stopping at
zero, the Fed will avoid bear markets. Rather, we’ll
have low-returning markets of about
3%
–
4%
returns
for bonds and
4%
–
5%
for stocks in the coming years.
That bond forecast makes sense, but I wouldn’t put
much stock in Gross’ stock forecasts. He’s been
brilliant with bond forecasts but impressively inaccu-
rate on stocks, maybe because his firm sells bond
funds, not stock funds. (
OK
, it has a couple of stock
funds, but
PIMCO
benefits greatly from investors
believing in bonds over stocks.)
This year
PIMCO Total Return
PTTRX
and near clone
Harbor Bond
HABDX
have lagged their peers
because
PIMCO
was betting that rates of long-term
Treasuries would spike, but they’ve actually rallied.
Despite the misstep,
PIMCO
still has a lot going for it.
It has made wrong calls before, but the record
shows
PIMCO
is right more than most people.
Michael Hasenstab is even more bearish on Treasuries,
but his fund isn’t positioned cautiously.
Templeton
Global Bond
TPINX
aims to have no correlation with
Treasuries by having negative duration in the U.S.
and also by buying some emerging-markets bonds
that others are scared of. He likes South Korea,
Turkey, Mexico, and even Ukraine. Now that’s bold.
Hasenstab says he can make a lot of money for inves-
tors by pursuing contrarian moves like those above
and patiently waiting for them to pay off, just as he
did in Ireland a few years ago.
Outflows in U.S. Stock and Bank-Loan Funds
Flows into U.S. equity funds reversed in May, when
we saw
$6
.
8
billion in net outflows after nearly a
year of steady inflows. It could be just a blip or the
start of something big. There’s no obvious trigger,
though, so we’ll have to wait and see.
Meantime, investors were enthusiastic about most
of the rest of the world. Foreign-equity funds took in a
net
$7
.
7
billion, and taxable bonds netted a robust
$9
.
5
billion. Allocation funds, muni bonds, and sector
funds also had solid inflows.
Another interesting reversal came in bank-loan funds,
where
$1
.
7
billion went out the door. We’ve seen
pretty strong inflows there the past few years, but it
reversed in April with
$1
.
1
billion in outflows. Bank-
loan funds are far larger than they were in
2008
, so
we’re really in uncharted waters when it comes to
seeing how they’ll handle outflows. Bank loans are
not terribly liquid.
U.S. growth funds of all market-cap levels also
suffered redemptions in May. (Some of that came
from conversions to collective investment trusts,
though, so it’s a little overstated.)
On the plus side, foreign large blend, nontraditional
bond, and diversified emerging markets enjoyed
strong inflows.
Overall,
$12
.
7
billion flowed into passive funds and
$10
.
4
billion went to actively managed funds.
On the fund level,
PIMCO Income
PONDX
took in
$1
billion in May and a total of
$4
.
1
billion for the
year. That fund is up
6
.
1%
for the year to date, so no
surprise that it’s drawing interest.
Metropolitan
West Total Return Bond
MWTRX
and
Dodge &
Cox International
DODFX
are also getting
solid inflows.
PIMCO
Total Return leads the way with outflows of
$4
.
2
billion. That’s a big number, but it’s not a big
percentage for a fund with
$228
billion.
Thornburg
International Value
TGVAX
shed
$1
.
4
billion and
has lost
$8
.
5
billion for the year. The fund has weak
three- and five-year performance.
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