401k converting PIMCO Tot Return to Loomis Sayles - advice?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
jbran99
Posts: 65
Joined: Thu May 24, 2012 7:15 pm

401k converting PIMCO Tot Return to Loomis Sayles - advice?

Post by jbran99 »

Hi all,

I recently received notice that my 401k plan will be dropping PIMCO's Total Return (PTTRX, .46 ER) and replacing it with Loomis Sayles Core Plus Fixed Income Trust (Class D). Other bond options in my 401k are somewhat limited (details below).

As near as I can tell, this is an Institutional fund described here. The overview that was provided listed an ER of .25, which is obviously very good. That said, the same overview has the following info in the Other Considerations section: "The fund is not a mutual find and is privately offered. Prospectuses are not required and prices are not available in local publications." That lack of transparency is a bit troubling.

My current IPS calls for a 3-way split of my bond holdings among Vanguard Total Bond, PIMCO Total Return, and Vanguard Intermediate Tax Exempt (details below). Obviously the IPS will need to change given that PTTRX is no longer available in my 401k.

My question: Do folks consider this Loomis Sayles fund a reasonable replacement for PTTRX (and I should accept the opaque-ness), or should I work toward having Vanguard Total Bond & Intermediate Tax Exempt be my only bond funds?

High-level portfolio overview
Target AA: 75/25 with Intl at 20% of total portfolio (current AA is on target)
Tax Rate: 25% Fed, 7% MN
Portfolio size: Approaching high 6 figures (~1.96 commas, for anyone that remembers that thread).

Taxable (18%)
6% Vanguard Intermediate Tax Exempt
3% Vanguard Total Intl
2% Vanguard Total Stock
5% Misc individual stocks
2% Cash (earning 2+% in local rewards-based checking acct)

His 401k (27%)
8% PIMCO Total Return
19% Vanguard Target Date 2030

Other bond funds: Legg Mason BW Global Opp (GOBSX, .58 ER), NYLife Anchor IV (Cash account paying <2%, .30 ER, Overview),
Other balanced funds: Vanguard Wellington, Vanguard Target Date 2010, 2020
Other stock funds: Vanguard PRIMECAP, State Street S&P500 index, various Munder Small/Mid cap funds, Dodge & Cox Intl

Her 401k (21%)
21% Principal LargeCap S&P 500 Index (PLFMX, .72 ER)

Other bond/stock funds: Nothing else below 1.0 ER.

His Roth IRA (25%)
13% Vanguard Total Intl
12% Vanguard Total Stock

Her Roth IRA (9%)
5% Vanguard Extended Market (in 4:1 ratio to balance S&P500 in Her 401k)
4% Vanguard Total Bond

The easy approach is to do nothing and simply let my 401k convert PTTRX into this new Loomis Sayles fund, but I'd rather make an intentional decision than an accidental one. Other options include moving to the Vanguard 2010 or 2020 Target Date funds to add more Total Bond, adding Vanguard Total Bond in His Roth IRA, etc.

Thanks in advance for any advice or thoughts on this!
User avatar
hoppy08520
Posts: 2193
Joined: Sat Feb 18, 2012 10:36 am

Re: 401k converting PIMCO Tot Return to Loomis Sayles - advi

Post by hoppy08520 »

It's a little awkward to keep track of your overall AA, but given the choices, I might consider doing this, using the Vanguard 2010 fund which is 63% bonds. Even better, if the plan has the Vanguard Target Retirement Income Fund (VTINX) fund, which is 70% bonds (of which some is total international bonds and some is short-term TIPS).
Other options include moving to the Vanguard 2010 or 2020 Target Date funds to add more Total Bond
Topic Author
jbran99
Posts: 65
Joined: Thu May 24, 2012 7:15 pm

Re: 401k converting PIMCO Tot Return to Loomis Sayles - advi

Post by jbran99 »

hoppy08520 wrote:I might consider doing this, using the Vanguard 2010 fund which is 63% bonds. Even better, if the plan has the Vanguard Target Retirement Income Fund (VTINX) fund, which is 70% bonds (of which some is total international bonds and some is short-term TIPS).
No VTINX option, but the 2010 has ~14% short-term TIPS right now (and rising to ~17% over the next few years). Actually, it's the TIPS component that makes me unsure about this option. I'm ~15 years away from even considering early retirement (turning 37 shortly), and a lot can change between now and then. Would that much in short-term TIPS be a drag on my 401k while I'm still in a growth/accumulation phase? Or is it minor enough to not really matter?
Topic Author
jbran99
Posts: 65
Joined: Thu May 24, 2012 7:15 pm

Re: 401k converting PIMCO Tot Return to Loomis Sayles - advi

Post by jbran99 »

Self-serving bump - anyone else have any thoughts on the Loomis Sayles Core Plus Fixed Income fund as a replacement for PIMCO Total Return?
User avatar
telemark
Posts: 3389
Joined: Sat Aug 11, 2012 6:35 am

Re: 401k converting PIMCO Tot Return to Loomis Sayles - advi

Post by telemark »

Looking at your link, the thing that jumps out at me is the performance in 2008: 1.57% for Loomis vs. 5.24% for the Barclay's index. On the other hand, the following year Loomis made 18.42% :!: vs. 5.93% for the index, and only making 1.57% in 2008 is not too bad in a year when many alternatives to the index actually lost money. I wouldn't call it a bad choice, but you need to think about why you are holding bonds and what behavior you hope to see from them.

You might mix in a small amount of the cash fund to mitigate the extra risk in the Loomis fund, but remember that PTTRX has some manager risk also.
lack_ey
Posts: 6701
Joined: Wed Nov 19, 2014 10:55 pm

Re: 401k converting PIMCO Tot Return to Loomis Sayles - advi

Post by lack_ey »

Yeah, pretty much anything heavier in corporates, taking more credit risk than Barclays Agg outperformed it in 2009.

Looks like the fund strictly limits its junk bond exposure but does go up to 20% (but not really in derivatives, it seems) and just is in more corporate debt than the index, which have driven returns of late. And it keeps within the same ballpark duration as the index. Looks like a reasonable enough investment strategy and holdings for a core bond fund. The fee charged looks like 25 bp or so, which is reasonable enough. PIMCO Total Return seems to be more ranging, wilder, and expensive. I would rather have this Loomis Sayles fund, at least based on the information I can find.

For what it's worth, some like Bogle say Barclays Agg doesn't have enough corporates, and Rick Ferri and others like 20% junk bond allocations. I don't think you can call this out of the mainstream.
rm
Posts: 331
Joined: Fri Oct 31, 2008 6:09 pm

Re: 401k converting PIMCO Tot Return to Loomis Sayles - advi

Post by rm »

I had loomis before. I liked it a lot before the 2009 meltdown :-). Then it dropped with everything else so not much of a hedge. According to a lot of folks it is not a good asset class to have.
Even now it hasn't recovered fully compared to S&P500 etc. (based purely on NAV)
User avatar
ruralavalon
Posts: 26353
Joined: Sat Feb 02, 2008 9:29 am
Location: Illinois

Re: 401k converting PIMCO Tot Return to Loomis Sayles - advi

Post by ruralavalon »

In your 401k plan materials is there a ticker symbol and expense ratio given for the Loomis Sayles Core Plus Fixed Income Trust (Class D)?

In your original post please add the tickers and expense ratios for the other balanced and stock funds offered in his 401k?
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
Topic Author
jbran99
Posts: 65
Joined: Thu May 24, 2012 7:15 pm

Re: 401k converting PIMCO Tot Return to Loomis Sayles - advi

Post by jbran99 »

lack_ey wrote:PIMCO Total Return seems to be more ranging, wilder, and expensive. I would rather have this Loomis Sayles fund, at least based on the information I can find.
Thanks lack_ey - that perspective is helpful. I think I'll adjust my IPS to allow for a smaller allocation to the LS fund (say ~5%), then tweak the rest of my portfolio to get back to my 75/25 AA.

Much appreciated!
lack_ey
Posts: 6701
Joined: Wed Nov 19, 2014 10:55 pm

Re: 401k converting PIMCO Tot Return to Loomis Sayles - advi

Post by lack_ey »

rm wrote:I had loomis before. I liked it a lot before the 2009 meltdown :-). Then it dropped with everything else so not much of a hedge. According to a lot of folks it is not a good asset class to have.
Even now it hasn't recovered fully compared to S&P500 etc. (based purely on NAV)
This investment option, or something involving stocks? Why are you comparing it to the S&P 500?
ruralavalon wrote:In your 401k plan materials is there a ticker symbol and expense ratio given for the Loomis Sayles Core Plus Fixed Income Trust (Class D)?

In your original post please add the tickers and expense ratios for the other balanced and stock funds offered in his 401k?
I'm not the OP but it looks like an investment trust or something otherwise not a mutual fund, so no ticker. It does seem to be similar in composition, style, and returns as the Core Plus Bond Fund (NERNX, which Morningstar analysts seem to like) except with lower expenses and seemingly separate assets. That fund seems to be maxing out the allowed junk allocation, so the credit risk there is nontrivial and a good deal higher than pure BarCap Agg.

For a portion of fixed income it sounds reasonable, especially if sticking to high quality elsewhere, like with a total bond index. Ideally you would use something cheaper, but you have to make do with the options available. If really concerned about the credit risk, altering the AA slightly to compensate (say to 72% stocks, 28% bonds) may be reasonable, depending on the size of this particular allocation, but this is within the margin of error and insubstantial so I'd just let it roll.
gwrvmd
Posts: 820
Joined: Wed Dec 02, 2009 7:34 pm
Location: Calabash NC

Re: 401k converting PIMCO Tot Return to Loomis Sayles - advi

Post by gwrvmd »

Regardless of what you do now, I would tell your plan administrator that whoever is the fiduciary in the plan is not fulfilling their fiduciary responsibilities by endorsing options that have no stock or ticker symbol so participants cannot compare its expenses and performance to peer funds and established indexes.
These are called Managed Accounts and, in my opinion, should not be allowed in 401(k) plans
There is no way to evaluate their performance or risk. You can, however, be sure it has a front end load and high expense ratio.....Gordon
Disciple of John Neff
User avatar
telemark
Posts: 3389
Joined: Sat Aug 11, 2012 6:35 am

Re: 401k converting PIMCO Tot Return to Loomis Sayles - advi

Post by telemark »

gwrvmd wrote:There is no way to evaluate their performance or risk. You can, however, be sure it has a front end load and high expense ratio.....Gordon
Let's not jump to conclusions. There's no evidence of a front end load, and 0.25% is quite reasonable for a managed fund. Vanguard charges more than that for some of their funds.
Stonebr
Posts: 1472
Joined: Wed Jan 21, 2009 10:19 am
Location: Maine

Re: 401k converting PIMCO Tot Return to Loomis Sayles - advi

Post by Stonebr »

Loomis Sayles is a very actively managed Fund company. Their star bond manager is an elderly guy named Dan Fuss. Fuss is one of the best bond managers around, but his strategy is not for the faint of heart. While PIMCO claims to use a top-down strategy -- macroeconomic trends -- Loomis Sayles claims to emphasize a bottom-up strategy. They claim superior credit analysis of individual bond issuers. IMO Loomis will most likely be more volatile than PIMCO.
"have more than thou showest, | speak less than thou knowest" -- The Fool in King Lear
Topic Author
jbran99
Posts: 65
Joined: Thu May 24, 2012 7:15 pm

Re: 401k converting PIMCO Tot Return to Loomis Sayles - advi

Post by jbran99 »

lack_ey wrote:I'm not the OP but it looks like an investment trust or something otherwise not a mutual fund, so no ticker.
Correct - it appears to be an investment trust. Our 401k, which is pretty good in my opinion, has a few investment trusts as 'wrappers' for other funds. In fact, the PIMCO Total Return was actually handled that way.
gwrvmd wrote:The fiduciary in the plan is not fulfilling their fiduciary responsibilities by endorsing options that have no stock or ticker symbol so participants cannot compare its expenses and performance to peer funds and established indexes
ruralavalon wrote:Please add the tickers and expense ratios for the other balanced and stock funds offered in his 401k
Sorry for any confusion - I'm set on my stock allocation and I was only concerned with the bond fund change, so I didn't present every possible option for my 401k. This previous post of mine is 2+ years old, but the options in His 401k are mostly the same.

It's a pretty good 401k, offers some very good low-cost options, no extra administrative charges or loads, mega backdoor Roth option, etc. Do I wish they offered Vanguard Total Bond as a standalone? Sure, but that's not going to make or break my retirement.

Thanks much to folks for commenting. It's certainly very much appreciated!
Post Reply