Daniel Ivascyn, Pacific Investment Management Co.'s new group chief investment officer, is about to go head to head with Bill Gross in the fastest-growing segment of fixed income: unconstrained funds.
Ivascyn, who was named PIMCO's investment chief on Sept. 26 after his old boss abruptly quit, was also appointed as one of the three portfolio managers on the $21.6 billion PIMCO Unconstrained Bond Fund. Gross will run a startup unconstrained fund for his new employer, Denver-based Janus Capital Group Inc.
The Unconstrained fund, which has the flexibility to invest in all types of bond securities globally and often invest in credit rather than interest-rate sensitive assets, is an important product for Newport Beach, California-based PIMCO. Its investors have been withdrawing assets from the company's traditional offerings, such as PIMCO Total Return, the world's largest bond fund, in anticipation of rising interest rates.
The company is counting on Ivascyn to revive the Unconstrained fund, which Gross took over in December after the fund trailed peers over the past five years. The firm, which manages $2 trillion, has lost ground to competitors such as BlackRock Inc. and Goldman Sachs Group Inc., which have attracted new money into such strategies amid a surge of demand from investors.
'New Perspective'
"What I hope to do is maybe bring a new perspective that we've utilized in the income strategy and even some of the hedge-fund strategies over to the unconstrained bond strategy," Ivascyn, who also manages the $38 billion PIMCO Income Fund, said in a Sept. 27 telephone interview.
Gross didn't respond to phone calls seeking comment.
Unconstrained or non-traditional bond funds collected almost $40 billion in the year ended Aug. 31, data from Chicago- based Morningstar Inc. show, compared with redemptions of $10 billion from conventional intermediate-term bond funds. Over the past three years, they have returned 3.7%, outperforming conventional intermediate bond funds, which rose at an annual pace of 3.4%.
Many of the funds have wagered on higher-yielding corporate and emerging-market bonds. For the most part, they have avoided interest rate bets on the assumption that rates would rise.
"In essence these funds take credit risk rather than interest rate risk," Steven Roge, a portfolio manager at Bohemia, New York-based R.W. Roge & Co. said in a telephone interview.
Losing Assets
