Pimco's outflow blues continue; DoubleLine takes a hit too

For the second straight month, investors fled the world's largest mutual fund. Investors pulled $7.5 billion from the $261 billion Pimco Total Return Fund (PTTAX) last month, following a record $9.5 billion of outflows in June, according to Morningstar Inc. A total of $15.6 billion was withdrawn through the end of last month. Jeffrey Gundlach's DoubleLine Total Return Bond Fund had $580 million of net redemptions in July, after suffering its first monthly withdrawals in June since opening in April 2010, Chicago-based Morningstar said. The outflows are largely the result of worries over interest rates and an uncharacteristically off year for manager Bill Gross. Overall, investors pulled about $60 billion from U.S. bond funds in June, the biggest monthly redemptions in records going back to 1961, according to estimates from the Investment Company Institute. They've pulled about $9.5 billion from the funds through July 24, according to ICI estimates. The Pimco Total Return had lost 2.55% year-to-date through June 30, trailing its benchmark by 20 basis points and the average intermediate-term-bond fund by 50 basis points, according to Morningstar data. The underperformance was chalked up to the fund's Treasury holdings, which were skewered when interest rates shot up nearly 100 basis points to 2.5% during May and June. The fund lost 3.5% in the quarter, its worst quarterly performance ever. Mr. Gross has maintained his stance on government debt, arguing that the Federal Reserve Bank won't be able to raise short-term rates until 2016 at the earliest.

Gross: So bonds come out of their coffin & it's not even Halloween. #Bernanke says follow policy rate & we agree. 2016 tightening @ earliest

— PIMCO (@PIMCO) July 21, 2013

Thirty-seven percent of the fund was held in U.S. government debt at the end of May. “The DoubleLine Total Return Bond Fund enjoyed substantial inflows in July, but a greater magnitude of redemptions resulted in a net outflow for July,” Loren Fleckenstein, an analyst at Los Angeles-based DoubleLine, said in an e-mailed statement. The fund's cash cushion has allowed DoubleLine to meet redemptions without being obliged to sell securities, Mr. Fleckenstein said. Mr. Gundlach's DoubleLine fund is down 0.2 percent in the past month, ahead of 69% of peers, and lost 0.5% this year, beating 81% of rivals, according to data compiled by Bloomberg. Over the past three years, DoubleLine Total Return Bond Fund (DBLTX) gained an annualized 8.1% to beat 99% of similarly managed funds. (Bloomberg News contributed to this article.)