This weekend, money management firm PIMCO tweeted out something a little bit sad.
Gross: 1 to 2 month performance numbers are a blip on a 40-year performance history. PIMCO marches on a long-term path.
— PIMCO (@PIMCO) July 7, 2013
PIMCO is the king of bonds, and of course bonds have been getting shellacked, and so PIMCO’s bond funds have been doing badly.
This can’t be any fun for the folks at PIMCO, but actually it’s a sign that PIMCO is doing its job, and giving its investors bond exposure.
The fact of the matter is that the bond market has seen move unlike any in a long time, and anyone who wants exposure to bonds has been whooped by the spike in interest rates.
Back in 2011, Bill Gross sent out a Mea Culpa, because he had reduced had bet against bonds, and then bonds proceeded to have a huge rally. That was problematic investors passively adding money every month to his bond funds thought they were getting bond exposure (which makes sense as part of an overall portfolio strategy) but then it turned out that the fund was not in step with the market.
Some sophisticated investors may want to go long and short the bond market as trades, but normal investors in big retail funds, the likes of which are offered by PIMCO, are placing a certain amount of their cash in bonds. When the entire market gets clubbed, any fund that’s doing its job will get slammed.
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