January 3, 2012 / 10:01 PM / 6 years ago

Gross's bond fund bleeds $1.4 billion in December: Morningstar

William Gross, Manager at Pacific Investment Management Co. (PIMCO), participates in the Obama administration's Conference on the Future of Housing Finance in the Cash Room of the Treasury Building in Washington in this August 17, 2010 file photo.Jason Reed

(Reuters) - The PIMCO Total Return Fund, the world's largest bond fund, had $1.4 billion in outflows in December, according to fund analytics firm Morningstar.

The fund, operated by Bill Gross, co-chief investment officer of Pacific Investment Management Co, suffered total redemptions of $5 billion in 2011, a year in which the fund underperformed benchmarks after betting heavily against U.S. Treasuries, which rallied on the year.

The fund, which has about $244 billion in assets under management, has had investor redemptions on and off for more than a year. Morningstar estimates total redemptions have exceeded $13 billion since November 2010.

Still, December was kinder to Gross than the previous year. In December 2010, Morningstar estimates investors withdrew $6.7 billion from the fund, PIMCO's flagship.

A spokesman for PIMCO, which is based in Newport Beach, California, and oversees more than $1.35 trillion in assets, was not immediately available to comment

Last year was a humbling one for Gross. His bad call on Treasuries led him to issue an unusual "mea culpa" letter to his investors.

U.S. Treasuries were the best-performing bond class in 2011 by a wide margin. The benchmark 10-year Treasuries returned nearly 17 percent in 2011, the largest gain for the U.S. bonds since 2008.

Meanwhile, other intermediate-term bond funds reported taking in new money in 2011, according to Morningstar. The JPMorgan Core Bond Fund took in $2.6 billion in new money and now has $23 billion in assets. The Metropolitan West Total Return Fund took in $5.3 billion in new money and now manages over $17 billion.

The fastest-growing bond fund in the space, according to Morningstar, is the DoubleLine Total Return Fund. It saw $10.6 billion in new money and now has over $15 billion in assets. Overall, DoubleLine manages about $22 billion.

Gross is moving to reclaim his past success by ramping up his purchase of mortgage-backed securities. The self-styled "bond king," analysts say, is betting on the likelihood the Federal Reserve will also purchase those securities in a bid to boost the U.S. housing market.

Additional reporting by David Gaffen; Editing by Leslie Adler

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