Pimco Opening Funds to Smaller Investors

NEWPORT BEACH — Pimco Advisors LP, one of the nation’s biggest and fastest-growing money managers, said Monday that it is opening its larger, more exclusive investment funds to consumers who have as little as $1,000 to invest.

In a push to expand its retail base significantly, the Newport Beach company reorganized and merged some of its funds, opening to consumers two top-ranked institutional funds run by nationally recognized bond portfolio manager William H. Gross.

Altogether, Pimco merged seven retail funds into institutional ones, opened 15 other institutional funds to retail customers and created a new mutual fund for consumers.

Until now, Pimco has catered to major pension funds and other institutional investors able to invest a minimum of $5 million. Through the parent company and six subsidiaries, Pimco manages a total of $110 billion in 40 mutual funds, including the nation’s largest fixed-income fund with $12 billion in bonds.

Opening many of those funds to individual investors and adding funds managed directly by Gross should be a good drawing card, analysts said.

“Gross deserves the reputation he has. He’s as good as you can get,” said Mark Wright, a senior analyst at Morningstar Inc., an industry provider of mutual fund information.

Last May, Pimco hired Stephen J. Treadway to head its distribution subsidiary with a mandate to build the retail business on what he called “an attractive basis.”

“This is the first phase, but a very important phase,” Treadway said. “We would like to just develop the market and get a reasonable market response,” which he said he would expect to see within six months.

“This is a tidal wave of new retail products,” Treadway said. He pointed out that 12 of the funds opened to consumers are highly rated by Morningstar.

Two major funds run by Gross were rated 9th and 11th last year in terms of overall returns, and each was rated first in its field over the last five years by Lipper Analytical Services Inc. in Summit, N.J.

Pimco’s stock hit a record high of $24.25 a share during trading Monday before closing at $24 a share on the New York Stock Exchange. But Wall Street, expecting Pimco’s retail push, had gradually bid up the price to $24 a share by Friday.

Pimco’s move to open up more of its funds to consumers represents an effort by the company to become a “full-tier player,” said Bruce R. Brewington, an analyst at Putnam, Lovell & Thornton in San Francisco.

Brewington said that even though Pimco’s institutional business has grown, the retail market is faster-growing and more lucrative. Unlike the big investors, individual consumers have to pay commissions and higher fees annually on their investments.

Treadway said, though, that costs for consumers will be coming down on all 26 funds now open to them. Consumers still will have to pay a broker’s commission--typically $45 to $47.50 for every $1,000 invested--but annual management fees will drop significantly to match what institutions are charged.

Consumers had been paying $1 to $1.15 a year for every $1,000 Pimco managed for them. Now they’ll be paying about 45 cents for every $1,000. However, they also have to pay other annual expenses, such as custody and transfer fees, that institutions don’t pay.

Even so, Treadway said, consumers will see their annual expenses drop $5 to $25 for every $1,000 invested, depending on which fund they’re in.