US Regulators Fear "Runs" From PIMCO's Systemic Risk As Outflows Soar To 12.5% Of Assets

Tyler Durden's picture

Things are rapidly shifting from bad to worse for PIMCO. In a triple whammy this morning, Bloomberg reports the Total Return Fund ETF (managed previously by Bill Gross) has suffered $446 million outflows (or over 12.5% of assets) so far; Morningstar downgrades the fund from 'gold' to 'bronze' citing "uncertainty regarding outflows and the reshuffling of management responsibilities"; and perhaps most concerning - given our previous warnings over bond market illiquidity - The FT reports, US regulators are monitoring trading and fund flows surrounding PIMCO's Total Return Bond fund warning investors they should contemplate the unintended consequences of pulling their money and the possibility of systemic risk disruptions, fearful of "runs."


First outflows are accelerating...


And Then...

Morningstar, the influential mutual fund research group, stripped the Total Return fund of its “gold” analyst rating late on Monday, downgrading it to “bronze” because of the “uncertainty regarding outflows and the reshuffling of management responsibilities”.

And on top of that, as The FT reports,

US regulators are monitoring trading and fund flows surrounding Pimco’s $223bn Total Return Bond fund and other products, in what could prove a test case in the debate over whether asset management groups contribute to systemic risk.


Officials at the Securities and Exchange Commission, the Federal Reserve and the US Treasury, among other bodies, have been talking to industry executives and other investors and warning they should contemplate unintended consequences of pulling their money from Pimco.




It also warned that large funds might be subject to “runs” if investors believe there is an advantage to pulling their money first, and it suggested regulators gather more data to test the concerns.

*  *  *

Who could have seen that coming?

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So Close's picture

He who sells first... sells best.

Haus-Targaryen's picture

So if I held PIMCO assets, I could withdraw them and be part of the catalyst that blows up the system?  

I would be honored too.   

GetZeeGold's picture



Outflows Soar To 12.5% Of Assets


I would have thought a little more.....gonna have to redo the math on this.

ShorTed's picture

it's a bit misleading...not 12.5% of the 200+ bln Total Return Fund, 12.5% of the Total Return Fund ETF.

A little bait and switch for you.

tonyw's picture

"He who sells first... sells best."

For you to be able to sell someone has to buy.

Is that a black swan i see?

ShorTed's picture

Oh yeah, and for the record the Fed Reverse RP today totalled 300bln @ 0%...bids ranged from +.05% to - .20%, 407bln total bids.

SoilMyselfRotten's picture

"US Regulators Fear".....

When US regulators have the balls to do their job, i'll consider giving a rats ass what they have to say

BigJim's picture

 The FT reports, US regulators are monitoring trading and fund flows surrounding PIMCO's Total Return Bond fund warning investors they should contemplate the unintended consequences of pulling their money and the possibility of systemic risk disruptions, fearful of "runs."

Ah, well, then, clearly PIMPCO is TBTF. Time to buy!

Leonardo Fibonacci2's picture

PIMP-co got the runs.  Too much white chocolate!

ejmoosa's picture

Not as long as the Fed is buying.

MsCreant's picture

That is a lot to swallow.

stormsailor's picture

maybe they will just spit instead

Stoploss's picture

Lemme in here:

Congrats Billy.   Please, allow me...





Kirk2NCC1701's picture

It's the Quiet Riot before the Storm.

As noted by Yours Truly on 8/29 (5159976),  He who panics quietly first, panics best.

p.s.  I exited quietly already.  Into USTs, Cash, select blue-chip stocks across the globe, PM, RE and Prep-stuff.  Now I can sleep and live life.

philipat's picture

"A little bait and switch for you."

Also disingenuous is the "Previously managed by Gross". Silly me, I had assumed that the whole point of ETF's is that they are NOT managed??

Cachao's picture

You are thinking of passive index ETFs. PIMCO's BOND is an active ETF and so is managed.

Even index ETFs have to be managed to a certain extent, though. A small ETF (ie low AUM) tracking a large index couldn't possibly own every bond in the index. The "passive" manager would still have to choose which securities to own.

TruthInSunshine's picture

Hank Paulson was on Bloomberg Financial Propaganda Vision this morning ordering the New York Federal Reserve to implement Goldman Sachs' pre-drafted plan to make unlimited U.S. Taxpayer fiat/debt available to PIMCO effective immediately, lest their be "tanks in the streets," F22s in the New York City skies, and Martial Law in American Cities by tomorrow morning.

Jon Corzine, Paulson's co-guest, wholeheartedly agreed, as did co-guest Chuck 'Screw Flyover Country/Wall Street is the Center of the Universe" Schumer, as well as co-guest ex-Federal Reserve Bank of New York President, Timothy 'Keebler Elf" Franz Geithner.

NotApplicable's picture

They let Corzine back on the TeeVee already? Well, fuck me. Wonders never cease.

*resumes drinking*

kchrisc's picture

What no Benie Madoff?!

A panel like that is not complete with out Bernie.

An American, not US subject.


stormsailor's picture

i heard it was tanks in the skies and f-22 in the streets.  maybe i need to adjust my tv

Gold is money - and bullets if your out of lead's picture

I actually went looking for the source.  Guys keep in mind there are folks here that are just waking up to the ponzi. Posting shit like this has the potential to fuck up our mornings.

fonzannoon's picture

This whole thing was probablty put in motion specifically because PIMCO is so huge and now they are barfing up precious collateral that others are desperate for. Everyone thinks they are doing backdoor QE, well detonating the biggest bond shop in the land may be exactly that.

If you are dumping your PIMCO fund you are aiding the cause. 

LawsofPhysics's picture

This is indeed the irony of it all.  Bill Gross was in fact forced to play along with the Fed.  Now he's being forced out and folks are mad that he is holding all the "AAA paper".


The idiocracy of modern finance and arrogance of these criminals at the top of the Keynesian pile of shit is simply amazing.

It think it was Hemmingway who pointed out that great people are often vunerable because they have character and integrity and often tell the truth.

Glad you are still around Fonz.  Business is still booming, really enjoying the cheap diesel prices...

fonzannoon's picture

It's good to talk to you guys too. I like the am crowd here. Always did.

LawsofPhysics's picture

Likewise, I have to run, but in my mind the REPO/reverse REPO activity says it all.  The collateral shortage in the west is accelerating, in so much as these fucks even understand or recognize what real collateral is...

I have to oversee the remaining pear/peach/apple harvest today.  It's late in the season and most of this fruit will end up in brandy, but it's time to clean the trees and area up, treat for pest post-harvest etc. etc.

Haus-Targaryen's picture

Please, no collateral shortage.  All the CBs have to do is change collateral requirements (cough ECB cough) -- and wa-la 

Aunt Jamekia can do a 400k 120% sup-prime note on her two temp part times jobs and her C1 bullshit is now accepted as 1:1 collateral. 


LawsofPhysics's picture

all fine an good as long as your trade partners still accept that paper.


"full faith and credit"

walküre's picture

Banks in Germany are financing 120% of RE purchase price to allow the buyer extra funds to "invest" in renovations. Mortgages @2.5% for 15 years are common.

Wild Theories's picture

You guys need to speak more so dumbasses like me can learn more stuff.

This little convo here just told me something I overlooked(guess I didn't read that blackrock article either)

CrazyCooter's picture

Interesting. I was suspecting there was something going on given PIMCO's sheer size and the term of Gross' tenure there.

Do you think they just flat ran Gross out of the office and created this shitstorm to disgorge its assets via redemptions?

Diesel is actually CHEAPER (by about 15 cents at last fill up IIRC) at the station down the street where I live in AK. Given the energy content vs gasoline, I was curious as to why. Demand off that much? Don't think I recall seeing that before and I asked my Dad who is retired in AR and he said it has been a very long time.



LawsofPhysics's picture

It's a large balance sheet, with numerous state pension $$$$.

makes sense to me in this "everything is centrally planned, gravity is outlawed shit-show"...

stormsailor's picture

i thought they only had mules in arkansas.  that must be missouri.

Lux Fiat's picture

Interesting view.  The icing on the cake is that Pimco is now foreign owned.  Nab the collateral and screw the foreign competiton at the same time. 

Eireann go Brach's picture

I dumped my Pimpco yesterday from my 401k. 

Kirk2NCC1701's picture

My FIRE contacts are seeing mortgage funding rise for select people and select properties.

It's... Paper looking for Safe(r) Harbors.

LawsofPhysics's picture

Many of us rode PIMPCo up ahead of and during the 2011 (May 2011-May 2012) Fed bond buying binge, I don't know many that hold such pimco shit now.

Aside from the usual state pension plans...

TruthInSunshine's picture

"the usual state pension plans..."

aka Dumbest Money

LawsofPhysics's picture

...and unfortunately the most likely to get a bailout from the taxpayer...

Haus-Targaryen's picture

Where does the tax payer get its money from? 

NotApplicable's picture

One government contract or another.

LawsofPhysics's picture

Precisely, everyone is "on the dole" in the modern world...

doesn't mean that real assets don't exist.

LawsofPhysics's picture

Please, the "taxpayer" is irrelevant, trade is not.

Government needs you to pay taxes's picture

How long would it take to burn a pile of fiat commensurate with the Federal Reserve's balance sheet?  The size of that pile is commensurate with the Fed's treason in disintemediating Congress/will of the voters in allocating Federal funds.  AFter it all blows up and the gibbet has been erected, I am counting on the Fed banksters being particularly 'juicy'.  Here, I hope 'gibbet' refers specifically to a guillotine.

OceanX's picture

"... the fund from 'gold' to 'bronze' citing"

So, why is a gold rating more important than Gold?

Sisyphus's picture

Morningstar ratings sucks! They, too, are great at predicting the past. If I remember correctly, they had AIG, Bear Sterns, Lehman, Wamu, etc. all rated as 5 Stars right before the 2008-09 financial crisis. Right after the bankruptcy and the collapse, they updated their research report to state the obvious. And people pay them subscription fees to read anal-cysts' reports and make investment decision based on them. Fucking snake oil salesman... all of them.

robertsgt40's picture

Nothing quite like having the "runs".  LMFAO  Banks will be the real acid test.

Carl Spackler's picture

Is Bill Gross the vaunted "Black Swan" ??