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ING Removes Bill Gross as Subadvisor of Bond Fund

The move was part of a broader effort by ING to bring in house some fixed-income funds that have been subadvised by PIMCO.

Robert Goldsborough, 04/02/2014

ING has removed PIMCO and its founder and chief investment officer Bill Gross as the subadvisor and manager of an intermediate-bond fund that ING has elected to take in-house.

The move, which was put in motion by ING's board in October--long before some recent turmoil at PIMCO--is one of several steps ING has taken recently to bring in-house some PIMCO-subadvised funds.

On Feb. 4, ING announced it would remove Gross and PIMCO as the subadvisor of ING PIMCO Total Return Bond Portfolio and temporarily rename the fund with the ever-so-slightly different moniker of ING Total Return Bond Portfolio. On March 21, ING merged the renamed fund into an existing ING fund, the $4.9 billion ING Intermediate Bond Portfolio IPIIX.

Separately, ING in February removed PIMCO as the subadvisor of an $877.4 million high-yield bond fund, ING PIMCO High Yield Portfolio, and renamed it ING High Yield Portfolio IPIMX. Gross had been a named manager on that fund for about seven months in 2009, but most recently, PIMCO's Andrew Jessop had been at the helm. ING's Rick Cumberledge, Randall Parris, and Matthew Toms now manage that fund.

The moves were "part of a comprehensive review of mutual funds offered within the ING Fund Complex that is intended to, among other things, enhance the efficiency and reduce the complexity of the ING Fund Complex," an ING spokesman said in an email. The merger "is designed to consolidate the portfolio into an ING fund with similar or compatible investment strategies and is expected to result in lower expense ratios and reduced overlap of funds offered in the ING Fund Complex."

ING Intermediate Bond ran into some problems back in 2008 with nonagency mortgage exposure. That exposure, in fact, was one of the factors that led ING to increase allocations to PIMCO. Since ING promoted Christine Hurstellers to be ING Intermediate Bond's portfolio manager in 2009, the fund has done much better, and over the past few years, ING's asset allocators have shown increasing confidence in her and the fund and have shifted assets back into it in ING's target-date funds.

PIMCO has been in the news lately amid reports of strife between Gross and others at the firm. Ultimately, the firm's CEO and heir apparent, Mohamed El-Erian, stepped down in January in the wake of conflict between him and Gross.

ING is not the only firm in recent times to remove PIMCO as a subadvisor. Several weeks ago, Columbia Management Investment Advisers fired PIMCO as the manager of a $1.3 billion, fixed-income portion of Columbia Funds Variable Series Trust II. That portion had been labeled the PIMCO Mortgage-Backed Securities Fund, and now will be known as the TCW Core Plus Bond Fund.

Robert Goldsborough is an ETF Analyst at Morningstar.

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