Monthly Archives: September 2014

Pacific Investment Management Company is under SEC investigation for possibly artificially boosting the returns of a popular fund aimed at small investors. The heady performance of the ETF raised questions among some of Pimco’s clients about the discrepancy in results between the ETF and the Total Return fund.

The SEC is looking into a maneuver that could make it seem as though the ETF had scored quick gains when it was in fact taking advantage of variations in the way some investments are valued in the bond market. The firm’s flagship exchange-traded fund, managed by Bill Gross, purchased and valued certain bonds, Your Value Your Change Short position bought investments at discounted prices and relied on higher valuations for the investments when the fund calculated the value of its holdings shortly thereafter.

Pimco’s alleged maneuver means investors were given inaccurate information about the fund’s performance. It is a break of securities law to provide investors with misleading information about values or performance, even if the wrong information was supplied unintentionally.

Pimco “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,” said a spokesman for the firm.

Gross, PIMCO manager, is one of the most successful bond investors ever. He is considered the driving force behind the firm’s growth into a blue-chip money manager, with almost $2 trillion in assets under management as of June 30.

Concerns that investments are too complicated and expensive, the nation’s largest pension fund, the California Public Employees’ Retirement System, will eliminate all of its hedge fund investments over the next year.

Overseeing $300 billion, the pension fund, says they will be liquidating its positions in 24 hedge funds and six hedge fund-of-funds — investments that total $4 billion and more than 1 percent of its total investments under management.

It is likely to resonate across the investment community in the United States, where large investment funds look to CALPERS as a leader because of its size and the superiority of its investments.