PIMCO Total Return Fund

Scorecard
3 / 5 Stars
Lipper
2 2 3 2 4
Zacks Investment Research
4 (Sell)
Standard & Poor's
1 / 5 Stars
TheStreet.com
D (Sell)

U.S. News evaluated 280 Intermediate-Term Bond Funds. Our list highlights the top-rated funds for long-term investors based on the ratings of leading fund industry researchers.

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Note: Profile written for different share class.

Performance

The fund has returned -1.49 percent over the past year, 3.26 percent over the past three years, 6.12 percent over the past five years, and 4.79 percent over the past decade.

Trailing Returns Updated 02.28.2014
Year to date 1.7%
1 Year -1.5%
3 Years (Annualized) 3.3%
5 Years (Annualized) 6.1%
10 Years (Annualized) 4.8%

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Summary

The PIMCO Total Return fund is the world's largest mutual fund. Manager Bill Gross employs a variety of strategies in selecting mostly investment-grade bonds, including using derivatives, that have produced top-notch returns for the fund.

 As of March 05, 2014, the fund has assets totaling $236.46 billion. Its portfolio consists mainly of investment-grade bonds, but it also includes some high-yield bonds and foreign investments.

Gross began loading up on U.S. treasuries before the financial crises in 2008 because he had concerns about the housing market well before most managers realized what was ahead. Management steered clear of the financial crises better than most because of Gross's foresight and "multiyear distaste for corporate bonds," according to Morningstar. Recently, Gross has moved into U.S. government debt, emerging markets, and countries with the most sound fiscal situations. In a March filing, management says it's looking to reduce its portfolio risk because it's unclear how quickly the global economy will recover. Says management: "PIMCO will hold high quality [emerging markets] sovereign credits such as Mexico, Brazil, Korea and Russia, which have low levels of debt relative to the size of their economies." Management also says that it will take a modest currency exposure to countries like Brazil, Australia, and Canada because of their sound fiscal situations. The fund has returned -1.49 percent over the past year and 3.26 percent over the past three years.

Over the years, Gross has loaded up on various sectors depending on market conditions. For example, "in the mid-1990s the fund held upward of 30 percent of its assets in corporate bonds," according to the Wall Street Journal. The fund's prospectus allows for extensive investments in derivatives and other futures trading, which involves not actually buying bonds but instead holding contracts for future sales. Futures trading will generally show up as large cash holdings for the fund. The fund has returned 6.12 percent over the past five years and 4.79 percent over the past decade.

Investment Strategy

Generally, Gross invests in high-quality bonds, but he can invest up to 10 percent of total assets in "junk bonds." Management will invest at least 65 percent of its total assets in a diversified portfolio of fixed income instruments of varying maturities including a wide range of derivatives, according to the fund's prospectus. Gross is given a fair amount of leeway to invest in a wide range of fixed-income options.

Role in Portfolio

Morningstar assigns the fund a "core" role in portfolio.

Management

Manager Bill Gross has been with the fund since the inception of its institutional shares in 1987 (Class A shares opened in 1997). Gross and his team are three-time winners of the Morningstar Fixed-Income Manager of the Year award (1998, 2000, and 2007). Gross was also named one of the three Morningstar Fund Managers of the Decade.

Fees

PIMCO Total Return Fund has an expense ratio of 1.60 percent.

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Risk

Management is given a fair amount of flexibility to invest in a wide range of fixed-income instruments, including the use of derivatives, so it can be hard to track exactly what the fund is holding. Management also at times will make large sector bets, according to Morningstar.

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Fund Opinions

The fund's Value Line Overall Rank, a measure of risk-adjusted performance and relative growth in fund returns, is 3 on a scale of 1 to 5, with 1 being the best and 5 the worst.

Value Line 2014-03-12

The fund's Value Line Growth Persistence rank, which awards funds that consistently outperform their broad universes, is 3 for one year, 3 for five years, and 2 for 10 years. Scores are on a 1 to 5 scale, with 1 being the best and 5 the worst.

Value Line 2014-03-12

The fund's Value Line Risk Rank, a measure of volatility, is 3 on a scale of 1 to 5, with 1 being the least volatile and 5 the most.

Value Line 2014-03-12

"We continue to view PIMCO as the premier fixed-income fund manager for investors who want a taxable, intermediate-term, high-quality bond fund. Our strong conviction stems from the firm’s disciplined investment process."

Litman Gregory 2010-06-30

The December 2009 edition of the No-Load Mutual Fund Investor says, "We recommend the fund for moderate stability and current income. Bond funds earning 30%, 40% or even more in a year is highly abnormal; even to earn almost 15% in a year from a somewhat conservative bond fund like PIMCO Total Return is unusual."

2010-02-17

In the December 2009 edition of Morningstar's FundInvestor, Russel Kinnel says, "Bill Gross and the team at PIMCO have achieved something very special. They began the decade with the largest bond fund and proceeded to produce another great decade of performance even as the bandwagon got bigger and bigger."

Morningstar 2010-02-17

Morningstar gives this fund a stewardship rating of B on a scale of A to F, saying, “This fund is supported by a strong corporate culture and run by a manager with lots of skin in the game. But its fund board isn't as independent as many in the industry.”

Morningstar 2010-02-17

In the annual Lipper/Barron's Fund Families Survey for 2009, PIMCO/Allianz Funds ranks 41st out of 61 fund families surveyed.

2010-02-17

Morningstar gives this fund a stewardship rating of B on a scale of A to F, saying, “This fund is supported by a strong corporate culture and run by a manager with lots of skin in the game. But its fund board isn't as independent as many in the industry.”

Morningstar 2010-02-17

In the annual Lipper/Barron's Fund Families Survey for 2009, PIMCO/Allianz Funds ranks 41st out of 61 fund families surveyed.

2010-02-17