Fund Times: PIMCO's Big Cash Haul

Fund firms are well on their way to erasing the $251 billion in outflows they experienced in the second half of 2008, according to Morningstar fund flow data. This year, through Aug. 31, 2009, investors have poured more than $226 billion into U.S. open-end funds. In August, $54 billion flowed into U.S. open-end funds, making it the single biggest month of inflows since February 2007.

Investors are still giving equity funds the cold shoulder, said Morningstar editorial director Sonya Morris. Fixed-income funds have received the majority of inflows this year. About 60% of August's flows went into taxable-bond funds, and muni funds soaked up another 20%.

The biggest beneficiary of these trends is PIMCO. Its  PIMCO Total Return (PTTRX) is the top-selling fund of the year. August inflows of $5.5 billion pushed the fund to a jaw-dropping $177.5 billion in net assets, Morningstar data show. To put that figure into context, PIMCO Total Return alone now represents 13% of the entire taxable-bond mutual fund universe. And it's almost twice as big as the second-largest mutual fund,  Vanguard Total Stock Market (VTSMX). PIMCO Total Return is up 11.65% for the year through Sept. 15 versus the Barclays Capital Aggregate Index, which is up 4.9% during that period.

Other bright spots in August fund flows include two Morningstar Fund Analyst Picks:  Templeton Global Bond (TPINX), which took in $1.3 billion for the month (bringing total inflows to $5 billion for the year so far) and  Dodge & Cox Income (DODIX), which took in $1.2 billion, pushing its 2009 total to $1.7 billion, according to Morningstar estimates.

Most major fund firms experienced inflows in August. The exception was American Funds, which is still second on the list of largest fund firms with assets under management of $848 billion, despite seeing outflows of $2.6 billion in August and $17.4 billion for the year to date, according to Morningstar estimates. Vanguard continued to shore up its position as the largest fund family with more than $9 billion in inflows in August, bringing its year-to-date total to $66 billion and its total mutual fund assets to $961 billion, according to Morningstar estimates.

American Century Vista Manager Takes Leave
Glenn Fogle, portfolio manager of  American Century Vista  since 1993 and a recently named CIO at the firm, has taken a leave of absence. Bradley Eixmann, the comanager since early 2007 who was an analyst on the fund before that, has moved up to lead manager. Vista lost a staggering 48.7% in 2008, more than most of its mid-growth peers. It's up about 18% so far in 2009 but still lags the majority of its category rivals.

Turnover has become an unsettling trend at American Century. In April of this year, Fogle was named CIO for American Century's U.S. growth equity--mid & small cap team. Steve Lurito had a short tenure as CIO for the firm's growth-stock funds before departing, and his responsibilities were split between Fogle and Greg Woodhams, who became CIO for U.S. growth equity--large cap.

Value Line Tries to End SEC Troubles
Value Line Inc. recently announced the creation of a $48 million reserve to cover its proposed SEC settlement. The SEC has investigated commissions paid by nine Value Line equity mutual funds to an affiliated brokerage subsidiary from 1986 through November 2004. Value Line also proposes that chief legal officer Howard A. Brecher, who has also been on the company's board for 17 years, assume the roles of acting chairman and CEO.

Given these significant problems, Morningstar mutual fund analyst Ryan Leggio suggests investors avoid the firm's mutual funds--including  Value Line (VLIFX),  Value Line Asset Allocation (VLAAX), and  Value Line Emerging Opportunities (VLEOX). "Value Line restructured its business back in 2004 to make sure these problems don't happen again, but until the settlement is final and we know more details, we think it's best to stay away," says Leggio. He also has concerns about Value Line proposing a longtime senior executive, who had oversight responsibilities during part of this troubling period, to step in as CEO.

Etc.
GMO will return to honoring redemptions with cash for all but one of its fixed-income funds, rather than "in kind," an uncommon practice that means redeeming investors with securities from the portfolio. The firm had announced in Oct. 2008 that it would begin meeting redemptions in kind due to liquidity challenges. GMO's resumption of cash redemptions reflects improved liquidity conditions, the firm said.

The SEC is seeking comment regarding its $16 million proposed penalty against Gabelli Funds LLC. The SEC seeks to compensate investors for losses due to market-timing activities between 1999-2002 in Gabelli Global Growth.

Effective Oct. 1, Judith A. Studer will replace David Wiederecht as portfolio manager of GE Small-Cap Equity . Wiederecht is also leaving GE Total Return , where Studer has been lead manager since July 2004, and Elfun Diversified (ELDFX).

ING International Equity Dividend is being liquidated around Oct. 29. ING Principal Protection XI , ING Principal Protection XII , and ING Index Plus LargeCap Equity Fund X will liquidate around Nov. 18.

Shareholders of Principal MidCap Stock  will vote on a merger of the fund with  Principal MidCap Blend Account (PEMGX). If approved, the merger will occur Oct. 23.

BlackRock Enhanced Income  will be liquidated by Nov. 20.

Hartford Income Allocation  recently merged into Hartford Total Return Bond (ITBAX).

Managers Fremont Global  has been renamed Managers AMG FQ Global Essentials and has terminated its subadvisory contracts with AllianceBernstein and Wellington Management. First Quadrant will remain as the fund's sole subadvisor.

The management of Managers Small Cap (MSSCX) accepted the resignation of subadvisor TimesSquare Capital Management, signed a new subadvisory agreement with Frontier Capital Management, and reopened the fund to new investors.

Transamerica recently approved a series of reorganizations in order to simplify their fund lineup. Transamerica Partners Value  will merge with  Transamerica Partners Large Value , Transamerica Partners Growth  will merge with  Transamerica Partners Large Growth , and Transamerica Partners Total Return Bond  will merge with  Transamerica Partners Core Bond , among others. All reorganizations will take place in late November.

The SEC's new Investor Advisory Committee formed three new subcommittees to address regulatory issues on behalf of investors. The Investor Education Subcommittee will focus on financial literacy; the Investor as Purchaser Subcommittee will examine investors' needs regarding specific investment vehicles and services, as well as fiduciary topics; and the Investor as Shareholder Subcommittee will review disclosure practices, proxy and other voting issues, and shareholder communication.