Regulators are investigating whether PIMCO, run by ''Bond King'' Bill Gross, artificially inflated the returns of its Total Return ETF. Fred Katayama reports.
It just keeps getting worse for Bill Gross. Regulators are investigating whether the bond trading firm he runs, PIMCO, artificially inflated the returns of its Total Return ETF. PIMCO says it has been cooperating with the SEC, and its German parent, Allianz, said it's aware of the probe. Allianz shares fell in Frankfurt. The Wall Street Journal reports that the pace of the investigation has intensified recently after going on for at least a year. And it says Gross was among those executives the SEC had interviewed. Possibly at issue: whether PIMCO fed investors inaccurate information about the fund based on the way it bought and valued its bond investments. J.P. Morgan analyst Michael Huttner thinks the news could push more investors to take profits after Allianz's six percent rally in the past month. Huttner said, "The risk is a reputation risk and for now, this is a negative for the share price of Allianz. However, we believe this is not a systemic risk." Known as the "Bond King," Gross grew Total Return into the world's largest bond fund after outperforming his peers for years. But a sour bet on Treasury bonds sank returns last year. Assets keep shrinking as investors keep fleeing the mutual fund. The ETF mirrors that fund but has outperformed it. And an ugly public feud with his one-time heir-apparent Mohamed El-Erian sullied Gross' personal image.