U.S. regulators are investigating whether the way bond giant Pacific Investment Management Co. values its bond holdings may artificially boost returns of one of its largest funds, according to report from the Wall Street Journal, citing unnamed sources close to the matter.
How the $3.6 billion Pimco Total Return exchange traded fund (ETF) bought some bonds at discounted prices and then relied on higher valuations for the assets when calculating the holdings' value is among the issues being probed by the U.S. Securities and Exchange Commission, the report said.
This could create the appearance of quick price gains, and the SEC may be focusing on whether investors are getting a misleading picture of the fund's performance, the report added.
A spokesperson at Pimco, which manages nearly $2 trillion, told the Wall Street Journal that the fund manager has been cooperating with regulators.
"We believe our pricing procedures are entirely appropriate and in keeping with industry best practices," the spokesperson said, while an SEC spokesperson declined to comment, according to the report.
The SEC didn't immediately return an emailed request for comment sent during Asian business hours. Pimco didn't immediately returnan emailed request for comment.
The article noted that it isn't clear whether Pimco's actions would be considered improper or how widespread this sort of valuation maneuver is among other bond managers.
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News of the investigation comes as Pimco's Total Return Fund, the world's largest bond fund which is managed by storied bond guru Bill Gross, had net outflows of $830 million in July, marking its 15th straight month of outflows, according to data from Morningstar.
Gross has faced additional scrutiny after media reports indicated the departure earlier this year of Pimco's then-chief executive officer, Mohammed El-Erian, was quite acrimonious.