PIMCO’s flagship hedge fund has lost more than 14% in 2019 — a rare stumble for the $3 billion credit strategy

  • The Global Credit Opportunity Fund is PIMCO’s flagship hedge fund, and runs more than $3 billion. 
  • The fund has lost more than 14% this year, sources said, after making money last year.  The average hedge fund has meanwhile lost 4%. 
  • The fund is run by Dan Ivascyn, the chief investment officer of the bond giant, and Jon Horne, a managing director at the firm. The fund has made money in four of the last five years. 
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The flagship of Pacific Investment Management Company’s hedge fund suite has dropped by more than 14% this year, according to several sources.

The Global Credit Opportunity fund, which manages more than $3 billion in assets, lost roughly 1.75% in October to bring its year-to-date losses to more than 14%. The fund is run by Dan Ivascyn, who replaced PIMCO founder and billionaire Bill Gross as the firm’s chief investment officer, and Jon Horne, a managing director that joined the massive fixed-income manager in 2006. 

The Global Credit Opportunity fund had managed to avoid losing money for several years. Last year, when the average fund lost money, the flagship fund returned nearly 9%. The only year since 2014 that the fund hasn’t finished with positive returns was 2017, when it broke even. 

The firm declined to comment on the performance of private funds. 

Another fund in the firm’s hedge fund suite, Tactical Opportunities, is up nearly 6% for the year. It’s managed by a team including Ivascyn, managing director Josh Anderson, and managing director Alfred Murata. The fund also runs more than $3 billion. 

Ivascyn’s troubles this year extend to PIMCO’s retail products as well. Reuters reported in August that the massive PIMCO Income Fund, which currently manages $131.2 billion, was lagging its peers thanks to some bad bets on mortgage-backed securities and Treasuries. 

In comments to Reuters in August, Ivascyn said the firm is willing to take losses in the near-term if it believes in the investment idea.

“We believe that corporate credit is fundamentally weak and could overshoot to the downside if the economy deteriorates,” he said to Reuters. “We also think developed government bond yields are too low and could easily reverse so we are comfortable with low rate exposure.”

The fund currently lags the average fund in its Morningstar category by more than 2%, and is behind 86% of its 308 peers. On a ten-year basis however, the biggest bond fund in the world, and one of the largest actively managed funds regardless of asset class, is still best-in-class. 

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