Pimco Total Return Fund Lagged Most Peers

Bill Gross's Pimco Total Return Fund, the world's largest bond fund, has lost ground to its peers again this month as the 2014 rally in U.S. Treasury debt stalled.

Investors in the $225.2 billion fund received a negative total return of 0.44%, reflecting price changes and interest payments, this month through Wednesday, according to fund tracker Morningstar Inc.

That compares to a loss of 0.24% for the benchmark Barclays U.S. Aggregate Bond Index, Morningstar said. The fund lagged behind 89% of its peers for the period.

Mr. Gross is co-founder and chief investment officer at Pacific Investment Management Co., which manages $1.97 trillion in global assets as part of Germany's Allianz SE.

This month, bond yields have ticked higher, shrinking the value of bonds, including the Treasury debt that makes up a large share of the Total Return fund. The benchmark 10-year Treasury note's yield traded Thursday at 2.571%, up from 2.514% at the end of June.

U.S. bond yields fell broadly in the second quarter, sending prices higher and lifting returns at Mr. Gross's fund. It posted a total return of 2.37% between April and June, compared with a return of 2.04% from its benchmark, according to Morningstar. The fund outpaced 77% of its rivals in that span.

Investors have kept a close eye on Pimco since Mohamed El-Erian, groomed by Mr. Gross as a possible successor, quit as chief executive and co-chief investment officer earlier this year. The Wall Street Journal reported in February that Messrs. Gross and El-Erian had clashed openly.

Clients pulled $4.5 billion from Mr. Gross's fund in June, the 14th straight month of outflows. The total net outflow from the fund exceeded $60 billion between May 2013 and last month. The July flow data may be released on Monday, according to Morningstar.

A Pimco representative declined to comment Thursday on the fund's performance.

Jeff Tjornehoj, senior research analyst for Lipper, said that Mr. Gross's fund remains a laggard so far this year and over the past 12 months.

"That has to change for inflows to resume," he said.

The Pimco fund's size has tumbled from a record high of $292.9 billion in April 2013, one month before investors started to pull out cash.

Asset numbers also take into account performance of the fund, while flow numbers don't.

The fund has returned 3.25% this year through Wednesday, lagging 76% of its peers.

Longer term, the fund remains a winner. It has posted an annualized gain of 6.8% on average over the past 15 years, beating 96% of its peers.

Write to Min Zeng at [e-mail]

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