Financial News: SEC Goes after PIMCO

U.S. regulators, like the Securities and Exchange Commission (SEC), are looking hard into PIMCO, also known as the Pacific Investment Management Company. PIMCO is a bond giant with $2 trillion under management. They are looking at whether or not this bond bellwether investment firm boosted returns of one of its bond funds.

They are looking at PIMCO’s Total Return Exchange Fund, valued at $3.6 billion an ETF, purchased bonds at a discounted price then used higher valuations for these assets. They used this to calculate the holding issues value which, artificially and illegally, boosted returns. This created an illusion of quick gains in price. The SEC is focusing on whether or not investors are being misled about performance of the bond fund.

A spokesman for PIMCO, as reported by the Wall Street Journal, said the firm was cooperating with regulators. He said the firm’s pricing procedures are appropriate “and in keeping with industry best practices.”

While PIMCO is under investigation, it is not entirely clear whether or not their actions are considered improper at this time. There is no indication as to how widespread this valuation practice is and the SEC is launching a probe to investigate this practice, not only with PIMCO, but with other bond managers.

The report, from the SEC, notes that the assets in question were bought after the funds inception in February 2012. They were bought in March. At the same time U.S. 10 Year Treasury yields climbed to 2.40 percent (which means prices dropped). They then fell off to a yield of near 1.45 percent over the next month. This clearly suggests that any assets bought by PIMCO during this time would have seen extremely sharp market valuation changes.

This investigation comes as PIMCO’s Total Return Fund, which happens to be the largest bond fund in the world, saw net outflows of nearly $830 million in July. This is the fifteenth month in a row it has experienced cash outflows.

We will continue to follow this story as it unfolds. Check back often with CupO’Forex for your latest Financial market and Forex news.