The Securities and Exchanges Commission is investigating fund giant Pimco over suspicions that it may have artificially boosted the returns of one of its most popular funds with small investors, according to media reports.
The Wall Street Journal quoted people familiar with the matter as saying that the SEC had been looking into pricing issues at Pimco’s Total Return exchange-traded fund–known familiarly by its ticker symbol BOND– “for some months,” and had interviewed its founder and chief executive Bill Gross personally during that time.
The Journal quoted a Pimco spokesman as saying that it “has been cooperating with the SEC in this nonpublic matter, and we take our regulatory obligations and responsibilities to our clients very seriously.”
“We believe our pricing procedures are entirely appropriate and in keeping with industry best practices,” he added.
The company didn’t immediately respond to a request for further comment early Wednesday in Europe.
BOND, launched in 2012, broke with the usual ETF practice of ‘passive management’, under which a fund’s holdings automatically track a certain benchmark, or basket of underlying securities. BOND has to show that its ‘active’ management by Pimco’s own investment professionals can actually deliver superior returns by smarter trading.
The ETF is not to be confused with Pimco’s flagship Total Return Fund, with over $220 billion in assets under management. Gross’s reputation as the “Bond King” has slipped in recent months due to its relatively poor performance and the acrimonious departure in January of chief investment officer Mohammed El-Erian.
Investors have pulled over $65 billion from the Total Return Fund in the last year and a half, with 16 straight months of withdrawals.