PIMCO Total Return Fund Rating Report – Read Before InvestingSeptember 18th, 2012 by David Waring
Category: Core Bond Funds
LB Rating: ***** 5 Stars
Last Updated: 9/17/12
PIMCO Total Return Fund Overview
Summary: Who wouldn’t want Bill Gross as their fund manager? The PIMCO Total Return Fund is a good choice for those looking for an actively traded core bond fund.
Commentary: The PIMCO Total Return Fund is the largest mutual fund in the world. Its hard to believe that a fund with ¼ trillion dollars of assets can consistently find ways to beat the market. But it does. PIMCO has been able to achieve superior returns by making large macroeconomic bets. It makes bets on the direction of interest rates, on the attractiveness of treasuries, mortgage backed securities, on the future of the euro and more.
Critics of the PIMCO Total Return fund have basically suggested that its outstanding returns have been a result of one basic trading idea: buying longer maturity bonds during a multi-decade period when interest rates were generally falling. They question if the fund will be able to continue to outperform in a period of low or choppy rates.
I think this criticism is unfounded. Bill Gross has not just made decisions regarding the maturities of bonds to buy, but the type of bonds, and even the currency which they are denominated. Having a good basic idea of where rates are headed is not enough. You need to know how to execute the idea. Bill Gross was able to execute the trade better than most other bond fund managers.
PIMCO Total Return Fund Rating Criteria
Short-Term Performance: Good The fund has outperformed the average core bond fund over the last 1 year and 3 year timeframes. Its performance is especially good over the last 12 months, during which time it has beaten the average core bond fund by 2.46%.
Long-Term Performance: Excellent The PIMCO Total Return Fund has significantly outperformed the average core bond fund over the last 5 and 10 year periods. Its performance has been especially strong in the last 5 years, where it has outperformed the average core bond fund by 2.46% per year on average.
Risk Level Relative To Returns: Good The ETF takes a moderate amount of credit risk with only around 30% of its holdings in the A credit range. (However, a large amount of the fund’s holdings are in unrated debt issues that if rated might be in the A credit rating range). The Fund’s interest rate risk is similar to its benchmark. Overall, the returns compared to the funds volatility is slightly better than average.
Fees: Good The PPTDX share class of the PIMCO Total Return Fund can be bought through many online brokers without paying a sales load. Its management fee of .85% is less than many other actively managed core bonds fund.
Manager Tenure: Excellent Bill Gross manages the PIMCO Total Return Fund. Nobody has managed so much money (not even Peter Lynch) with such a good track for so many years. With 25 years of managing the the Total Return Fund under his belt, the only question is when will he retire. He claims that it will not be anytime soon.