Pimco Total Return Fund Lures $1.3 Billion in New Cash

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 [e-mail]

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