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Alphaville usually doesn't care much about insurers' results, but Allianz's ownership of Pimco – the world's largest bond investment group – makes it a good way to understand the dynamics of the broader fixed income market.
Pimco CEO Manny Roman certainly sounded optimistic when he spoke to our colleagues at Unhedged in December, arguing that “there's going to be a tidal wave of money coming.”
On Friday we were able to see how that expectation is taking shape, in the German insurer's fourth-quarter earnings statement. Below are PIMCO's flows over the past two years.
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Despite some outflows last quarter, Pimco had €24 billion in net inflows last year, helping to trim the €75 billion in outflows it suffered in 2022, one of the worst years for bond markets in the world. the date.
The decline in average assets under management has weighed on operating profits, but Pimco's portfolio managers appear to be pushing back, having almost doubled the performance fees the asset manager received from investors in 2023. As a result, overall operating profits still stand at €2.45 billion. . It contributed about 16 percent to Allianz's overall results.
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However, the really interesting stuff – if you're a fixed income person at least – was in the subsequent conference call with analysts.
Allianz CEO Oliver Butt noted that 20-year yields falling to zero and then suddenly rising higher is a “bond managers’ nightmare,” but said 2024 inflows were already approaching last year’s total (Text excerpts below provided by AlphaSense ):
We have had inflows of over €20 billion this year already, which is very good. It's almost equal to all the streams we had last year. So asset management is really making a comeback, and it's very important to understand that it's an important driver.
Bäte has been talking about its asset management business more generally, so Allianz Global Investors – its onshore bond investing arm – may be responsible for some of this. But given that AGI actually suffered some modest outflows last year, it's very likely that it's all about Pimco.
Claire Marie Coste-Lepotre, Allianz's new CFO, later added some additional color on this (as well as some classic CFO caution). Alphafil concentration below.
On the PIMCO side, I mean, obviously, I don't have a crystal ball. So, it's not easy to estimate, I will say. But what we're seeing is clear, and you're already seeing that partly as well in 2023. In 2023, PIMCO only had a couple of months where inflows were a little bit negative. All the other months have been positive and we've seen momentum, and obviously the start of the year has been very positive for PIMCO. Also importantly, as Oliver mentioned, we do not see a bifurcation in terms of inflows, as we move more towards passive flows rather than active flows. So this is very supportive of PIMCO's path. If you discuss with Roman he is definitely convinced that this will also continue until 2024. But again, that's why we look at it the way it is now, we don't know at this time yet.
This may be a Pimco-only thing, but it appears to be a broader signal that the long-discussed “bond comeback” narrative is finally becoming a reality. EFPR Global data suggests that net inflows from fixed income funds have now surpassed the $100 billion mark – fortunately for all bond managers, active inflows are outpacing passive inflows so far in 2024.
