Gross fund among worst hit by bond sell-off

Bill Gross’s $285bn Pimco Total Return fund led falls among the world’s most popular bond portfolios after the Federal Reserve prompted a global sell-off by indicating it may start tapering its QE programme.

According to Bloomberg, Gross’s flagship, the world’s largest mutual fund, lost 1.6% from 18-20 June, the day after the Fed discussed its exit strategy. The fund fell 2.8% for the year.

This was the second worst performance of 19 US total return funds with at least $2bn in assets, according to Bloomberg data. The $4.2bn Bernstein Intermediate Duration Portfolio was the worst performer this year, down 2.9%.

The falls came as investors pulled record levels from bond funds in the week ended 12 June, according to EPFR Global. Funds lost $14.5bn to outflows last week and $12.5bn the week before.

Investors pulled an estimated $1.32bn from Gross’s fund in May, according to Morningstar, which were its first withdrawals since 2011.

However, bond managers have said now is a bad time to sell bonds because the economy is not strong enough to sustain higher borrowing costs, Bloomberg reports.

Gross (pictured) warned this week that investors who are selling US government debt now are missing the influence of inflation on the central bank’s decisions.

“The market basically has misinterpreted the growth and unemployment targets while leaving out inflation targets going forward,” he said.

 

This article was first published on Investment Week

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