Bill Gross, manager of the world’s largest mutual fund — Pimco Total Return Fund — goofed early this year on his bet that Treasury bond prices would fall, and now he’s paying the price.
Investors aren’t flocking to his fund like they used to, The Wall Street Journal reports.
In the first nine months of the year, only $183.5 million flowed to the $242 billion fund, according to Lipper research firm. The fund brought in $17.6 billion last year and $57.7 billion in 2009.
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“For a fund with over $240 billion in it, an inflow of $180 million is close to zero,” Jeff Tjornehoj, senior research analyst for Lipper, tells The Journal.
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“Being on the wrong side of the Treasury bond market rally injured performance and reputation. When someone so visible makes a mistake it has large consequences.”
Gross has had perfectly bad timing on Treasurys this year. He lowered the fund’s holdings of Treasurys to zero in February, just when the 10-year Treasury yield reached its 2011 peak of 3.77 percent.
The Treasurys market has rallied sharply since, with the 10-year yield hitting a record low of 1.67 percent last month.
Now Gross has picked up some long-dated Treasurys. But Treasurys have slumped in recent days.
“You really must have a steady drumbeat of bad news to sustain lower yields, and we are not seeing that,” Michael Cloherty, head or interest rate strategy for Royal Bank of Canada, tells Bloomberg.
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