PIMCO Total Return Loses Big In November

Outflows second highest for the month out of 10 largest bond funds

Bill Gross (below) said earlier this year that "bonds have seen their best days," a view that was validated in November, according to Morningstar.

Bill Gross' PIMCO Total Return Fund, the largest taxable-bond fund in the country with $256 billion in assets, saw redemptions of $1.9 billion in November, according to preliminary Morningstar fund flow data. This was the fund's first month of net outflows in two years.

The Chicago-based research firm reports PIMCO Total Return wasn't alone. The Morningstar Intermediate-Term Bond Category, the category with the largest amount of inflows this year with more than $74 billion, had $154 million in outflows in November. Like PIMCO Total Return, this was the category's first month of net outflows in two years.

The rise in bond yields in recent weeks has led to sharp declines in bond funds. The 10-year Treasury note's yield increased to 2.81% from 2.63% in November.

PIMCO Total Return lost 1.5% in November alone, its worst month since September 2008. The Barclays Capital U.S. Aggregate Bond Index declined 0.57% in November.

The fund's advisor, PIMCO, still took in $1.1 billion for the month, thanks in part to the continued popularity of PIMCO Unconstrained Bond Fund which absorbed $700 million. PIMCO Commodity Real Return Strategy fared even better with $800 million in flows.

In related news, Morningstar reports PIMCO managing director Paul McCulley will retire at the end of the year to join a think tank.

McCulley joined the firm in 1999. He heads Pimco's short-term bond desk, is a member of PIMCO's investment committee, and is author of the monthly research publication, Global Central Bank Focus.

Jerome Schneider will replace McCulley as manager of PIMCO Short Term Bond Fund on Jan. 1. Prior to joining PIMCO in 2008, Schneider was a senior managing director with Bear Stearns.

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