The world's biggest bond fund, run by Bill Gross, took in $1.3
billion in new cash in August, lifting the total inflow for the
year to $9.3 billion.
Investors flocked to the $270 billion Pimco Total Return Fund
(PTTRX) as Mr. Gross's fund has churned out a return that has been
more than twice the gain on the benchmark index so far this year.
Mr. Gross, known as the bond king, is founder and co-chief
investment officer at Pacific Investment Management Co.
The fund has handed investors a return of 8.12% through the end
of August, beating the 3.85% of the Barclays US Aggregate Bond
Index, according to data from Morningstar. The fund has beaten 92%
of its rivals this year.
Over the past 15 years, the bond fund has returned 7.43%,
compared with the 6.25% return on the benchmark.
Mr. Gross's portfolio has been heavily concentrated on
high-quality U.S. assets this year, reflecting the company's
worries over the euro zone's debt crisis, which has clouded the
global economic outlook.
Like many other investors, Mr. Gross also expects the Federal
Reserve to launch a new bond-buying program involving a combination
of mortgage-backed securities and Treasury bonds that could bolster
the value of the targeted securities.
Mortgage-backed securities and Treasurys account for 84% of the
fund's portfolio at the end of July, according the latest data
available on the firm's website.
Mr. Gross told Dow Jones Newswires last month that he favors
Treasury notes maturing between five years and seven years while
shunning the benchmark 10-year notes and 30-year bonds.
The preference suggests Mr. Gross desires exposure to a market
that's still a hideout from the euro zone's unresolved debt crisis
and a slowing global economy, but that he continues to worry about
long-term inflation risks.
Mr. Gross has long worried that the Fed's unconventional
monetary stimulus will eventually stoke inflation and that this
will eat into the real return on long-term bonds.
"At $3 trillion, the Fed's balance sheet can only go higher, in
my opinion, which in turn is inflationary," Mr. Gross said in an
email response to questions in mid-August. "That is why 30- and
10-year Treasurys should be sold in favor of safer five- to
seven-year maturities."
Reflecting his concerns about inflation, Mr. Gross said last
month he has invested "substantially" in Treasury
inflation-protected securities, or TIPS, whose value rises along
with higher price pressures.
Mr. Gross has also touted gold and real assets as a hedge
against inflation risks.
Pimco, part of Allianz SE (ALV.XE, ALIZF), is one of the world's
biggest asset-management companies, with more than $1.7 trillion in
assets under management.
Write to Min Zeng at min.zeng@dowjones.com
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