Will turmoil at PIMCO threaten bond market liquidity?

02 October 2014

Last week saw the shock defection of PIMCO founder and fixed income guru Bill Gross to rival firm Janus. With outflows from his flagship PIMCO Total Return reported at $23.5 billion during September alone, Rob Harley, Senior Research Analyst at Tilney Bestinvest comments on the potential implications for bond market liquidity.


Rob Harley says:

“As CIO of the world’s largest fixed income house, Bill Gross was responsible for steering fund strategy across billions of US$ of assets, his departure is likely to result in many investors reviewing their fund selection, potentially resulting in significant outflows.

“The PIMCO Total Return ETF, essentially a mirror of his $200bn + open ended vehicle, also provides market participants with a clear indication of the sort of securities held within his equivalent open ended vehicle, this could leave investors vulnerable to the actions of short sellers, potentially introducing more volatility to markets. That said, it is worth bearing in mind that Gross’s fund has been experiencing redemptions for most of the year following a period of poor performance, so the fund is likely to be already positioned to provide a degree of liquidity for existing redemptions.

“Diversification and the quality of the underlying holdings also mitigate some of the risk, whilst large institutional investors could potentially be met by in-specie transfers.

“On balance we believe those looking for a larger market reaction to this event alone, might be disappointed. However this is not to say that investors should remain complacent to the risk of price volatility in this market. Liquidity risk is now a greater and more permanent feature of the corporate credit markets - something investors will have to learn to live with going forward. Indeed it could be argued that any significant technical deterioration, if there were one, would be unlikely to affect credit markets in isolation - all asset classes would be likely to feel similar price pressures.

“As always, risks present opportunities, so any deterioration in technicals, in the absence of poorer fundamentals, could provide a buying opportunity.”

Tilney Bestinvest’s top five fund choices for retail investors wanting to achieve broad exposure to fixed income markets are:

  • Kames Strategic Bond
  • Fidelity Strategic Bond
  • M&G Optimal Income
  • Invesco Perpetual Tactical Bond
  • PFS Twenty Four Dynamic Bond

For more information on why we like these funds please contact us.

- ENDS -

Important information:

The value of investments, and the income derived from them, can go down as well as up and you can get back less than you originally invested.  This article does not constitute personal advice.

Bonds issued by major governments and companies will be more stable than those issued by emerging markets or smaller corporate issuers; in the event of an issuer experiencing financial difficulty, there may be a risk to some or all of the capital invested.  Please note that historical or current yields should not be considered reliable indicators of future performance.

Press contacts:

Jason Hollands
0207 189 9919
07768 661 382

Roisin Hynes
020 7189 2403
07966 843 699

About Tilney Bestinvest

Tilney Bestinvest is a leading investment and financial planning firm that builds on a heritage of more than 150 years. We look after more than £9 billion of assets on our clients’ behalf and pride ourselves on offering the very highest levels of professional client service with transparent, competitive pricing across our entire range of solutions.

We offer a range of services for clients whether they would like to have their investments managed by us, require the support of a highly qualified adviser, prefer to make their own investment decisions or want to take more than one approach. We also have a nationwide team of expert financial planners to help clients with all aspects of financial planning, including retirement planning.

We have won numerous awards including UK Wealth Manager of the Year, Low-cost SIPP Provider of the Year and Self-select ISA Provider of the Year 2013, as voted by readers of the Financial Times and Investors Chronicle. We are pleased that our greatest source of new business is personal referrals from existing clients.

Headquartered in Mayfair, London, Tilney Bestinvest employs almost 400 staff across our network of offices, giving us full UK coverage, and we combine our award-winning research and expertise to provide a personalised service to clients whatever their investment needs.

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For further information, please visit: www.tilneybestinvest.co.uk




About Tilney

Tilney is a leading investment and financial planning group that builds on a heritage of more than 180 years.  Our clients are private investors, charities and professional intermediaries who trust us with over £23 billion of their assets. We offer a range of services including financial planning, investment management and advice and, through our Bestinvest service, a leading online platform for those who prefer to manage their own investments.

We have won numerous awards. Tilney has been awarded Best Conventional Advisory Service at the 2018 City of London Wealth Management Awards, Best Advisory Service in the 2015 City of London Wealth Management Awards; Investment Award – Cautious category in the Private Asset Management Awards; and Stockbroker of the Year, Execution-only Stockbroker of the Year and Self-select ISA Provider of the Year 2015, as voted by readers of the Financial Times and Investors Chronicle. Bestinvest was voted Best SIPP Provider and Best Fund Platform at the 2017 City of London Wealth Management Awards, Best Direct SIPP Provider at the YourMoney.com Awards 2017, Best Stocks & Shares ISA Provider at the 2017 Shares Awards, as well as Best Self Select ISA Provider, Best Online/Execution-only Stockbroker and Best Investment Platform 2017 at the FT and Investors Chronicle Investment and Wealth Management Awards, as voted by readers of the FT and Investors Chronicle.

Headquartered in Mayfair, London, the Tilney Group employs over 1,000 staff across our network of 30 offices, enabling us to support clients with a local service throughout the UK.