Pacific Investment Management Co. is losing a client it has had for three decades the latest sign of the asset management industry’s intense squeeze on fees.
The firm is being replaced as manager of the $1.6 billion Harbor Bond Fund in favor of Income Research + Management. With the switch, investors will pay at least 30% less in fees, according to a regulatory filing.
Harbor Bond is switching managers as investors seek ever-lower fund expenses. It also expects a shakeout in fees for a key segment of the fixed-income market known as core-plus funds. Such funds combine riskier fixed-income instruments with core holdings in investment grade debt to supplement returns.
“I would expect there to be a repricing” in the category in the next two to four years, Kristof Gleich, president of Harbor Capital Advisors, said in an interview. “We wanted to get ahead of that.”
Officials at Newport Beach, California-based Pimco declined to comment. Harbor Capital continues to employ Pimco as a sub-adviser to separate accounts. Gleich said the firm “has been a great steward of our capital for 35 years.”
Pimco started managing the Harbor Bond Fund in 1987. At the start, it was run by Pimco’s Bill Gross using the strategy the star manager employed for his successful Total Return Fund. Even after Gross’s departure from Pimco, it has continued to run Harbor Bond with that strategy.
