Confirmed: May was bad for Gross and his fund

May was the worst month for Bill Gross since the financial crisis. Last month, his Pimco Total Return Fund (PTTAX) suffered its first month of net outflows in almost two years, as the fund suffered its worst month of performance in almost five years, according to a Reuters report. Investors withdrew a net $1.3 billion in May, the first month of net outlfows since $1.35 billion was pulled in December 2011. Performancewise, the $292 billion Pimco Total Return Fund lost 1.9% in May, its worst single month since September 2008, thanks to a 50-basis-point surge in interest rates as worries over the Federal Reserve's eventual tapering off of its stimulus program led investors to sell off government debt. The fund had approximately 39% of holdings in Treasuries as of April 30, according to Bloomberg data. The loss put Mr. Gross, co-chief investment officer of Pacific Investment Management Co. LLC, in the somewhat unfamiliar position of being at the bottom of the bond fund heap. Pimco Total Return trailed almost 90% of its peers in May; the fund's 0.56% loss for the year, through June 3, ranks it in the bottom half of all intermediate-term bond funds, according to Morningstar Inc. The only other time Mr. Gross has been in such a position was in the second half of 2011 when his aversion to Treasuries caused the fund to finish the year in the bottom 10% of its fund category. Mr. Gross then issued a “mea culpa” to investors apologizing for the underperformance. This time around, Mr. Gross has been much more vocal about the lack of returns to be found in bonds. In early May, he even tweeted that the 30-year bull market in bonds likely came to an end April 29 when the 10-year Treasury was at 1.7%. It since has surged to around 2.15%. Mr. Gross isn't ready to throw in the towel just yet, as long as the Federal Reserve is playing ball.

Gross: Keep smilin'! 30 yrs of bond bull mkts have raised returns & spirits. Now there r doubts. We're stickin' w/ bonds as long as #Fed does

— PIMCO (@PIMCO) June 4, 2013