Philadelphia partner Diana McCarthy was quoted in a Bloomberg Business article titled, “Pimco May Have Averted Fire Sale After Gross’s Exit.”
The article discusses the expectations and the reality of what happened after Bill Gross left Pimco Total Return Bond Funds last September. Traders had expected that the bond fund would be forced to dump assets at fire-sale prices; however, owing to a provision in the Investment Company Act of 1940, Pimco was able to cross trade assets with a fund in the same family and was not required to dump assets at all.
The SEC requires that such cross-selling occurs at market prices and be advantageous to both parties, to avoid that one fund dumps unwanted assets on another, or sells them at inflated prices to artificially boost its own returns.
“It saves money on transaction costs and it also allows you to dispose of securities without going into the market and impacting the price,” added Diana in an interview.