Pimco the recession beater

16-Jul-2009

---

Pimco the recession beater
Tim Blue

8 June 2009
The Australian
Copyright 2009 News Ltd. All Rights Reserved

Fund management
PIMCO, the world's biggest manager of bonds, is proving the standout winner in the fund management
industry as Australians continue to flee to safe havens in the wake of the global financial crisis.
Ignoring the bounce in equities, investors pushed $625 million into Pimco's hands to manage in local
and global bonds in the March quarter, to take the firm's Australian business above $20bn in funds
under management.

It is the second quarter running in which Pimco has outstripped the competition, according to investment
house Morningstar, as investors warmed to its global credit and global inflation-linked strategies.

``Despite the recovery in Australian equities in early March, it seems that defensive asset classes like
cash and fixed interest continue to be favoured by most investors,'' Morningstar said.

``Investments in cash and fixed interest overtook equities in the quarter for the first time since March
2008,'' it said.

Pimco's business growth was a rare bright spot in the industry, savaged by the global financial
meltdown that has seen 20 per cent chopped off the value of assets under management.

Australian managed fund assets plunged 21.4 per cent -- or $220.3bn -- over the past year, to reach
$810.8bn. This included a $32.1bn (3.8 per cent) fall over the March 2009 quarter.

Retail fund assets fell 5.6 per cent to $265.6bn over the March quarter, although this was half the
massive 11.2 per cent ($35.5bn) slump over the December 2008 quarter.

Wholesale fund assets fell 5.8 per cent to $201.7bn over the three months to March 31, with 53 of the
62 wholesale fund managers Morningstar surveys recording declines.

Wholesale fund assets have contracted by more than a quarter (27.3 per cent) since touching $277.3bn
at March 31, 2008. Worst hit in March was Axa, dropping 14 per cent to $34.7bn, due to a 28.4 per cent
fall in global equities and a 20.9 per cent fall in Australian fixed interest assets.

Not all is doom and gloom in equities, with several boutique managers reporting increased investor
interest and mandate awards.

Treasury Asia Asset Management (TAAM), Rare Infrastructure and Orion Asset Management have
received inflows in the past month after a seven-month dry spell, in a sign that institutional investors are
slowly re-entering the equities market. ``In January and February we began to have conversations with
big investors along the lines of what we might be able to do for them -- as if they were coming up for air.
We've started to see allocations in the past month or so,'' managing director of boutique incubator
Treasury Group Mark Burgess said yesterday.

``Asia is clearly coming into focus as the place to be,'' he said. ``There's an attitude among retail and
institutional investors that it's time to start investing to catch the upswing.'
'
Index funds were popular, with specialist manager Vanguard attracting the most inflows of $781m over
the three months of the quarter, or more than double the second-placed Commonwealth Colonial group.
Vanguard's flows were a big improvement on the December 2008 quarter, when it endured a $230m
Page 2 of 2 2009 Factiva, Inc. All rights reserved.

outflow. The consolidated BT and StGeorge has emerged as the biggest player among wrap providers,
with the BTWrap, Asgard, and Advance platforms ending the March quarter with a combined $19.1bn in
assets, or 41.6 per cent of the wrap sector.

The consolidated entity drew in $440m in the March quarter.

AUS-20090608-1-023-109024
Document AUSTLN0020090607e5680005x