December 2, 2013 / 4:21 PM / 6 years ago

UPDATE 2-Pimco Total Return Fund performance flat in Nov - Morningstar

By Sam Forgione

NEW YORK, Dec 2 (Reuters) - Bill Gross’s Pimco Total Return Fund, the world’s largest bond fund, delivered flat performance in November, averting losses even as fears surrounding the Federal Reserve’s next policy move hurt bond prices, preliminary data from Morningstar showed on Monday.

The performance of the fund, which has $248 billion in assets and is the flagship of bond giant Pimco, marked its weakest turnout in three months but beat the performance of 85 percent of its peers, the data showed.

Gross has averted losses in his fund by shortening the duration of the fund’s assets, said Todd Rosenbluth, director of mutual fund research at S&P Capital IQ. The fund’s effective duration was 4.35 years as of Oct. 31, according to the Pimco website.

The fund’s performance is important because Pimco manages roughly $1.97 trillion and is one of the world’s largest bond managers. The Newport Beach, California-based Pacific Investment Management Co is a unit of European financial services company Allianz SE.

The Pimco Total Return Exchange-Traded Fund, an actively-managed ETF which is designed to mimic the strategy of the flagship mutual fund, fell 0.35 percent last month, marking its first negative performance in three months but still beating 50 percent of peers.

The ETF, which was launched in February 2012, has roughly $3.7 billion in assets, according to Morningstar. The ETF is down 0.33 percent this year, beating 88 percent of peers, according to Morningstar data.

Gross’s flagship fund averted a negative performance in November despite uncertainty surrounding the Fed’s plans for unwinding its $85 billion in monthly bond-buying, which hit bond prices.

U.S. Treasury yields shot higher on Nov. 20 after minutes from a Federal Reserve policy meeting in October suggested the U.S. central bank could begin to scale back quantitative easing in the next few months. The Fed’s next meeting is in December.

The yield on the benchmark 10-year U.S. Treasury note rose 20 basis points to 2.74 percent over the month. The Barclays U.S. Treasury index fell 0.33 percent over the month, marking its first negative return in three months.

As of Oct. 30, Gross’s fund had 37 percent of its assets invested in Treasuries and other U.S.-government related securities, according to the Pimco website.

For the year, the mutual fund is down 0.97 percent, beating 54 percent of peers, according to Morningstar data. The fund endured a rocky summer period starting in May, when interest rates spiked higher on fears that the Fed could begin scaling back its bond purchases this year.

Losses in May, June, and August, combined with outflows of $33.2 billion this year through October stripped the fund of its status as the world’s largest mutual fund, Reuters reported last month. That title now belongs to the $251.1 billion Vanguard Total Stock Market Index.

Jeffrey Gundlach’s DoubleLine Total Return Bond Fund , a competitor to the Pimco fund, fell 0.22 percent in November, beating 55 percent of peers, the preliminary data showed. That marked the fund’s first negative monthly return in three months after a gain of 0.64 percent in October.

The fund is up 0.72 percent this year, beating 91 percent of peers, according to Morningstar. The Barclays U.S. Aggregate bond index, meanwhile, is down 1.47 percent this year.

The fund had $811.2 million in outflows in November. The outflows marked the sixth straight month of withdrawals from the fund, which is the flagship of the Los-Angeles based DoubleLine Capital LP.

The outflows reduced assets in the fund to about $33.3 billion, according to Morningstar data. DoubleLine, where Gundlach is chief executive and chief investment officer, had $53 billion in assets as of Sept. 30.

The outflows from the fund also accounted for most of the $823.1 million in total withdrawals from the firm’s U.S. mutual funds in November, Morningstar data showed. The Total Return Bond Fund now has roughly $33.3 billion in assets.

“DoubleLine’s intermediate-term bond funds continue to experience net outflows, as is the case among intermediate-term bond funds throughout the industry,” said Loren Fleckenstein, analyst at DoubleLine.

He noted that the firm’s short-duration bond, floating-rate bond, and stock funds have attracted inflows.

Investors have continued to pull cash out of bond funds since June on fears of a spike higher in interest rates once the Fed begins scaling back the $85 billion in monthly bond purchases for its economic stimulus program known as quantitative easing.

Investors pulled $21.8 billion from bond mutual funds and exchange-traded funds in November, marking the biggest outflow since $36.8 billion in August and the fifth-highest monthly outflow on record, according to data from TrimTabs Investment Research.

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