Pimco said Monday that it received a Wells Notice from the Securities and Exchange Commission relating to Pimco Total Return Active ETF (ARCA:BOND).
Advertisement
Bond fund manager Pimco has warned it may face civil charges from the US regulator over how it valued holdings in its giant Total Return bond exchange-traded fund (ETF).
Investors pulled $2.5 billion from Pacific Investment Management Co.’s flagship fund in July, the 27th consecutive month of outflows from what used to be the world’s largest mutual fund.
The Pimco Income Fund, overseen by Pimco Group Chief Investment Officer Dan Ivascyn who succeeded Gross, continues to see huge investor appetite, posting about $1.4 billion in inflows in July, following about $1.7 billion in inflows in June, according to Pimco’s website.
The investigation relates to “smaller-sized positions” purchased between the ETF’s launch on February 29 2012 and June 30 2012. The issuing of a Wells Notice is a preliminary procedure by the US regulator and does not imply that any wrongdoing has taken place.
To value these odd lots, Pimco often relied on external companies that used prices based on more liquid pools of comparable bonds.
Advertisement
In the press release sent to the WSJ, Pimco wrote that the Wells process “provides us with our opportunity to demonstrate to the SEC staff why we believe our conduct was appropriate, in keeping with industry standards and that no action should be taken”. The fund, which is now run by Scott Mather, Mark Kiesel and Mihir Worah, has returned 1.6 percent this year, outperforming 93 percent of peers, according to data compiled by Bloomberg. Assets in the fund have plunged to $101 billion from a peak of $293 billion in April 2013.
