Pimco Total Return Fund Lost 14% of Assets in Four Months

The world’s biggest mutual fund keeps getting smaller.

Bill Gross’s $251 billion Pimco Total Return Fund dropped more than $41 billion, or 14 percent of its assets, in the past four months through losses and investor withdrawals. The fund suffered $7.7 billion in net redemptions in August, Chicago-based researcher Morningstar Inc. said today in an e-mailed statement, the fourth straight month of withdrawals and the second highest amount this year.

Top managers from Gross to Jeffrey Gundlach and Dan Fuss have seen their funds shrink after Federal Reserve Chairman Ben S. Bernanke in May raised the possibility that the central bank would begin to scale back bond purchases. The Barclays U.S. Aggregate Index, among the most widely used fixed-income benchmarks, declined 3.2 percent this year and fell almost 3 percent since May 22.

The yield on the 10-year U.S. Treasury note rose to 2.9 percent today from 1.93 percent on May 21, the day before Bernanke spoke. U.S. Treasuries lost 3.5 percent this year through yesterday, according to Bank of America Merrill Lynch indexes.

In the past four months, investors redeemed about $26 billion from Pimco Total Return Fund, which became the world’s largest mutual fund in 2009. The fund lost 3.9 percent this year through yesterday, trailing 86 percent of peers, according to data compiled by Bloomberg. During the past five years, the fund advanced 6.7 percent, putting it ahead of 87 percent of similarly managed funds.

Record Redemptions

An e-mail and phone call to Mark Porterfield, a spokesman for Pacific Investment Management Co. in Newport Beach, California, weren’t returned.

Investors pulled about $60 billion from U.S. bond funds in June, the biggest monthly redemptions in records going back to 1961, and $26.2 billion last month through Aug. 28, according to estimates from the Investment Company Institute. Pimco Total Return suffered $9.6 billion in redemptions in June, according to Morningstar.

Gundlach’s $37 billion DoubleLine Total Return Bond Fund had its third straight month of net withdrawals in August, as clients pulled $1.1 billion, according to Morningstar estimates. Since April 30, the fund has lost about 10 percent of its assets through investor redemptions and market losses, according to data compiled by Bloomberg. Gundlach’s fund declined 1.2 percent this year through yesterday, putting it ahead of 86 percent of rivals, and returned 7 percent over the past three years, ahead of 97 percent of peers.

Rivelle, Fuss

The $24 billion Metropolitan West Total Return Bond Fund, run by Tad Rivelle, lost 4 percent of its assets since April 30, and the $7.9 billion TCW Total Return Bond Fund, also managed by Rivelle, lost 17 percent of its assets, according to data compiled by Bloomberg. Investors pulled a net $519 million from the Metropolitan West Fund since the start of June and $1.4 billion from the TCW Fund, according to Morningstar estimates.

Fuss’s $21 billion Loomis Sayles Bond Fund is down about 10 percent in assets. Like Pimco Total Return, Loomis Sayles Bond Fund had four straight months of withdrawals, Morningstar said.

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