| Bonds Online |
 |
|
| 5/10/2013Market Performance |
| Municipal Bonds |
|---|
|
S&P National Bond Index
|
3.00% |
|
|
S&P California Bond Index
|
2.96% |
|
|
S&P New York Bond Index
|
3.13% |
|
|
S&P National 0-5 Year Municipal Bond Index
|
0.70% |
|
|
| S&P/BGCantor US Treasury Bond |
400.09 |
|
| More |
|
| Income Equities: |
|---|
| Preferred Stocks |
|---|
|
S&P U.S. Preferred Stock Index
|
848.03 |
|
|
S&P U.S. Preferred Stock Index (CAD)
|
636.26 |
|
|
S&P U.S. Preferred Stock Index (TR)
|
1,701.05 |
|
|
S&P U.S. Preferred Stock Index (TR) (CAD)
|
1,276.26 |
|
|
| REITs |
|---|
|
S&P REIT Index
|
174.07 |
|
|
S&P REIT Index (TR)
|
425.30 |
|
|
| MLPs |
|---|
|
S&P MLP Index
|
2,469.58 |
|
|
S&P MLP Index (TR)
|
5,428.50 |
|
|
See Data
|
|
|
|
 |
|
|
|
|
|
|
Bond King Gross's Throne Wobbles As Bad Bets Dim Fund Returns |
DOW JONES NEWSWIRES - Oct. 13, 2011 - By Min Zeng and Mary Pilon
-Inflow drastically slows in Total Return Fund managed by Gross
-Some investors pull out, but some others say this year is a blip
-Gross shifts views, now betting on interest rates to fall
-Some analysts caution this strategy could backfire if yields rise
By Min Zeng and Mary Pilon
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--This is stacking up to be one of the worst years for high-profile money manager Bill Gross.
His ill-timed bets on Treasury bonds have set his $242.2 billion Total Return Fund, the world's largest bond fund, up for one of its poorest annual returns in a decade. And that has generated another blow: new money flowing into the fund has dramatically slowed in 2011, a stark contrast to the strong inflows seen in the previous few years.
This year through the end of the third quarter, the fund attracted $183.5 million in new contributions, according to data compiled by fund tracker Lipper under the request of Dow Jones Newswires. The fund lured $17.6 billion in new money last year, $57.7 billion in 2009, and $20.4 billion in 2008.
"For a fund with over $240 billion in it, an inflow of $180 million is close to zero," said Jeff Tjornehoj, senior research analyst for Lipper. "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, founder and co-chief investment officer at Allianz SE's Pacific Investment Management Co., wasn't available to comment Thursday. Mark Porterfield, spokesman of Pimco, didn't immediately reply to voice mail and e-mail seeking comments on the flows.
Already, some investors, like Keith Amburgey, chief investment officer at Rutherford Asset in Naples Florida, have pulled money out of the Total Return Fund.
"Pimco has gotten so large we believe it limits their opportunities," he said.
But some investors stayed put. Ed Mosser, a salesman based out of Valparaiso, Ind., began investing in the Total Return Fund at the start of the year when it became available in his workplace 401(k) retirement plan.
"I'm in this for 10 years or more," said Mosser. "Bill Gross made a short-term misjudgment. I don't think he'll be able to recover from this by the end of the year, but in the long-term, things could work out."
Some fund managers also see this year as a blip. "The guy is very intelligent," said Mark MacQueen, partner and portfolio manager in Austin, Texas, at Sage Advisory Services Ltd. "And he has been on the right side more often than the wrong side."
Often dubbed "the bond king," Gross's views on markets and the economy are widely tracked by global investors and policymakers. Gross frequently appears on TV to air his views on monetary policy, the economy and markets.
That celebrity status was founded on his impressive performance record of the past two decades. Over the past 20 years, the Total Return Fund only underperformed the benchmark bond index four times based on yearly returns, according to data from Lipper. Fund tracker Morningstar's data show that over the past 15 years the fund has handed investors a return of 7.21%, beating 6.33% from the benchmark index and outshining all of its comparable rivals.
But this year, the fund only handed investors a return of 1.05% through Wednesday, compared with 5.67% for the index, according to data from Morningstar. The fund was beaten by more than 90% of comparable bond funds, according to Morningstar.
Gross emptied the Treasury holdings in the fund in February when the benchmark 10-year Treasury yield hit this year's peak of 3.77%, up from 3.278% at the end of 2010. But that move ended up costing him dearly as the yield, which moves inversely to its price, plunged to as low as 1.672% last month.
Gross has played catch-up in recent months, shifting to a bet that bond yields will stay at relatively low levels or even fall further. Reflecting the change, Gross has scooped up long-dated Treasurys, mortgage securities and other bonds, whose yields are more sensitive to changes in interest rates than short-dated securities.
Gross and his colleagues are now expecting interest rates to stay low because of the Fed's ultra-loose monetary policy, including its latest stimulus effort to buy long-dated Treasury bonds. Treasurys maturing more than 20 years had returned 25% this year through Wednesday, according to data from Barclays.
Now, some analysts say Gross' new bets could be roiled should rates move up and bond prices fall. In recent sessions, long-dated Treasury yields have risen from the recent lows--the 10-year yield traded at 2.159% Thursday--amid hopes for a bold solution to the euro zone's debt crisis, which has removed some of Treasurys' "safe haven" appeal. Fears about a U.S. recession have also subsided.
"Certainly, the Fed has embarked on sharply restricting the supply of future long dated Treasurys, but if the marginal buyer of long Treasurys does not expect a continuation of similar performance, or if financial and economic conditions only modestly improve, and the Fed is successful in awakening inflation expectations, then prices can and will easily fall," said Christopher Sullivan, who oversees $1.85 billion as chief investment officer at United Nations Federal Credit Union in New York.
-By Min Zeng, Dow Jones Newswires; 212-416-2229; min.zeng@dowjones.com
|
|
|
|
|
|
| Partner Market Place |
|
|
|
| Stuff to look at |
Yield and Income Newsletter: A must have for income investors. subscribe NOW
S&P Commentary and Newsletters: S&P
|
|
| BondsOnline Advisor |
Income Security Recommendation January 2013 Issue.
Keep up with monthly, in-depth coverage of fixed income market strategies, commentary, and insights as seen by our sources. Sign up for the free BondsOnline Advisor now!
Unsubscribe here [+] |
|
|
|
|
