Pimco Liquidates Arnott-Run Smart Beta Fund

By John Gittelsohn

April 28, 2017 at 12:32 PM

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Pacific Investment Management Co. liquidated a smart beta fund, the Pimco RAE Worldwide Fundamental Advantage Fund, effective Friday, according to the firm's website.

The fund, which had almost $4.2 billion in assets at its peak in September 2014, had fallen to about $316 million as of March 31 as performance trailed peers.

"We constantly review our suite of strategies and may liquidate a fund from time to time if we feel it no longer serves our clients' needs," Pimco spokesman Michael Reid said in an emailed statement.

Established in 2012, the fund ranked among the lowest 13 percent of its peers over the past three years, according to data compiled by Bloomberg. Sales for the fund were suspended April 3, according to a prospectus posted on Pimco's website.

The fund used a combination of long and short positions in global stocks to build a "market neutral" portfolio selected through a process developed by Rob Arnott's Research Affiliates, an external adviser for Pimco. It aimed to outperform its benchmark, the London Interbank Offered Rate.

Arnott is known as one of the fathers of smart beta investing, which uses mathematically derived rules to make investments based on a range of factors, such as volatility or dividends. Research Affiliates and Pimco, which are both based in Newport Beach, California, have teamed up on several mutual funds.

"We are committed to RAE and will be expanding our RA relationship in equities," Reid said. RAE refers to the Research Affiliates Equity strategy.

Research Affiliates referred a request for comment to Pimco. The liquidation was reported earlier Friday by Reuters.

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