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Even the ‘Bond King’ Can Get Smoked By ‘Safe’ Investments

The PIMCO Total Return Fund (PTTAX) — the world’s largest bond fund by assets with $285 billion under management — enjoys celebrity status, as does its “Bond King” manager, Bill Gross.

But in June, Total Return suffered its worst month since the meltdown of 2008.

As Treasuries and other government bonds fell apart last month, the PIMCO fund shed just more than 2.6%. According to Morningstar data, PIMCO’s offering was beaten by four out of every five mutual funds in the intermediate-term bond fund space.

Retail investors who hold the PIMCO Total Return ETF (BOND) fared slightly better with decline just over 2.2%.

The S&P 500, if you’re curious, was down a little less than 1%.

Bill Gross isn’t the only one who was hit hard by the meltdown in Treasuries, either. Jeff Gundlach’s DoubleLine Total Return Bond Fund (DBLTX) lost roughly 1.7% in June to mark its worst month in three years.

It’s no surprise, of course, that these bond funds took it on the chin. The yield on the 10-year T-Note jumped from above 2.1% to roughly 2.5% in June on speculation that the Federal Reserve would cut back on quantitative easing efforts and perhaps tighten policy further by hiking rates later this year. As rate go up, bond prices fall — so this dynamic was, to a degree, expected.

But PIMCO was particularly hard-hit since it had more than a third of its total holdings in Treasuries, its biggest position.

It goes to show that even “low-risk” mutual funds like these bond investments from PIMCO can underperform. And these kind of disruptions will continue as central bank policy moves the markets.

The good news — if investors can find any here — is that if Bill Gross gets burned, it’s OK for you to have a bad month, too.

Just remember that several bad months in a row means you should fire your manager … even if it’s you managing your own investment account, bonds or stocks or otherwise.

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Jeff Reeves is the editor of and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at or follow him on Twitter via @JeffReevesIP

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