The Once Mighty Vanguard 500 Falls to Pimco Total Return

October 7, 2002 ( - How far the (once) mighty have fallen sums up the current race for the largest domestic mutual fund.

With the bears hanging on for dear life in the markets, prompting stock investors to race for the doors in a bid for quality, the once-dominant Vanguard 500 Index Fund has lost its perch as the nation’s largest mutual fund to the Pimco Total Return, a bond portfolio, Reuters reported.

The Pimco fund’s assets, managed by the high-profile Bill Gross, ballooned to $64.6 billion at the end of September, a Pimco representative reported to Reuters.

Meanwhile, a spokesman for the Valley Force, Pennsylvania-based Vanguard Group said its 500 Index fund, a passively managed portfolio that mimics the Standard & Poor’s 500 stock index, finished the month with $62.8 billion.

Pimco Total Return recently surpassed Fidelity Investments’ Magellan fund in assets.

“This is not a reflection of the popularity of index funds,” John Woerth, the Vanguard spokesman, told Reuters. “This simply is a reflection of the bond market going up and the stock market going down. Index funds are still popular despite two and a half years of bear market.”

Vanguard 500 Index — down 28.2% so far this year — still has attracted $1.3 billion from investors over the last 12 months, according to Financial Research Corp. of Boston.

But performance has dragged the fund’s assets down from a level of roughly $70 billion at the end of July.

Investors at the same time have poured $11.8 billion into Pimco Total Return over the last 12 months, data showed.