By Sam Forgione
NEW YORK Jan 2 The Pimco Total Return Fund, the
world's largest bond fund, had a negative return for 2013 of
nearly 2 percent, its first annual loss in 14 years, as fears of
a reduction in the Federal Reserve's bond-buying sent Treasury
prices lower, preliminary data from Morningstar showed on
The performance was the weakest for the fund since 1994,
when it posted a negative return of 3.6 percent, Morningstar
data showed. The fund declined about 1 percent in December,
beating just 6 percent of peers, according to preliminary
Pimco Total Return, with $244 billion in assets, is the
flagship of the Newport Beach, California-based Pacific
Investment Management Co. Bill Gross, the legendary manager of
the fund, is the firm's co-founder and co-chief investment
The performance of Gross's fund is closely watched because
Pimco manages roughly $1.97 trillion in assets and is one of the
world's largest bond managers. Gross's views, along with those
of co-Chief Investment Officer and Chief Executive Mohamed
El-Erian, are widely influential.
Pimco is a unit of European financial services company
The fund suffered last year from a sizeable bet on U.S.
Treasuries, whose prices declined after Fed Chairman Ben
Bernanke signaled in late May that the central bank could begin
scaling back its bond-buying stimulus if the U.S. economy looked
"It highlights the risk of bond investing, that even
managers with billions of assets under their guidance can have a
bad year," said Todd Rosenbluth, director of mutual fund
research at S&P Capital IQ.
The Pimco Total Return Fund had a 37 percent exposure to
Treasuries at the end of May, making it the fund's largest
holding, according to data released on the Pimco website last
year and compiled by Reuters. The fund's exposure to U.S.
government debt remained high throughout the year despite the
selloff in Treasuries, and was at 37 percent at the end of
Yields on the benchmark 10-year U.S. Treasury soared after
Bernanke testified before Congress on May 22 that the central
bank could begin scaling back its $85 billion in monthly
purchases of Treasuries and agency mortgages later in 2013.
The 10-year Treasury yield, which fell to a low for the year
of 1.62 percent on May 2, ended 2013 above 3 percent, an
increase of about 140 basis points. Bond yields move inversely
to their prices.
In recent letters to investors and posts on social media
platform Twitter, Gross has recommended that investors buy
shorter-dated Treasuries on expectations that the Fed will keep
short-term interest rates low until 2016 or later.
The Pimco Total Return Exchange-Traded Fund, an
actively managed ETF designed to mimic the strategy of the
flagship mutual fund, fell 0.85 percent in December, making it
the worst performer of its category for the month and resulting
in a drop of 1.2 percent for the year.
That annual return still beat 80 percent of peers, however,
according to the preliminary data from Morningstar. Investors
pulled $115.8 million from the ETF in December, marking its
eighth straight month of withdrawals, Morningstar data showed.
The ETF has about $3.5 billion in assets.
Jeffrey Gundlach's DoubleLine Total Return Bond Fund
, a competitor to the Pimco fund, fell 0.7 percent in
December, beating 19 percent of peers. The fund had outflows of
$2.08 billion in December, Reuters reported on Wednesday.
Gundlach's fund, which has about $31 billion in assets and
is the flagship of Los Angeles-based DoubleLine Capital LP, rose
0.02 percent last year, beating 88 percent of peers, according
to the preliminary Morningstar data.