Pimco’s Total Return, the largest mutual fund in the world, has for years stood as the industry’s gold standard, thanks to the deft management of Bill Gross.

But now it appears the bond fund will suffer its first year of net outflows since its inception in 1987, The Wall Street Journal reports.

In the 11 months through Nov. 30, investors took out about $2.3 billion from the $241.5 billion fund, according to Lipper estimates, and $3.6 billion according to Morningstar estimates.
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The negative trend stems from Gross’ bad bet early this year that Treasury bonds would fall. He dumped all the fund’s Treasury positions, and then the bonds soared.

As a result, Total Return sits in the bottom 10 percent of its peers when it comes to returns this year.

Pimco's Bill Gross (Pimco file photo)

Through Wednesday, the fund had a total return of 3.14 percent, compared to 7.3 percent for its benchmark, the Barclays Capital U.S. Aggregate Bond Index.

To be sure, the fund still has an impressive five-, 10-, and 15-year performance. And Gross has reloaded on Treasurys, which may prove to be a smart move.

“Mistakes — not existential problems — are at the root of Pimco Total Return's sluggish performance,” Morningstar analyst Eric Jacobson writes in a report.

And he sees a bright side. “Far from signaling a fund hamstrung by its size, relatively dramatic changes to its composition in the past year actually suggest the opposite.”