Pimco Bond Fund Lost $5 Billion to Withdrawals Last Year

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. Treasurys, 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.
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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 Treasurys led him to issue an unusual "mea culpa" letter to his investors.

U.S. Treasurys were the best-performing bond class in 2011 by a wide margin. The benchmark 10-year Treasurys 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.