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TheStreet Open House

4 Spectacular Fund-Manager Blowups of 2011

Stocks in this article: PTTAX FAIRX CGMFX LMVTX

BOSTON ( TheStreet) -- Pimco bond baron Bill Gross reportedly said it was a mistake to sell Treasuries before a big rally this year. When a bond fund manager underperforms his or her benchmark index, "you go home at night and cry in your beer," Gross said.

But unlike most of us, the likes of Gross and other mutual fund and hedge fund managers still earn millions of dollars a year despite their sometimes colossal miscalculations.

John Paulson is one of several high-profile fund managers to get burned by choppy markets this year.

A lot of investors -- professional and not -- have been tested this year, as a confluence of events, from natural disasters to an unexpectedly weakening economy, has pummeled stocks. The benchmark S&P 500 Index's yo-yo performance -- down 8.6% over the past three months and 2.5% this year -- is giving money managers and ordinary Americans fits.

Even hedge fund manager John Paulson, who reportedly has made more than $10 billion in the past three years by betting against the subprime mortgage-backed securities market and wagering on gold's increase, is reportedly suffering giant losses.

The Wall Street Journal said in a story last week that Paulson's Advantage Plus hedge fund has lost 39% this year through Aug. 25, citing an unnamed source. Gold-related losses were the primary reasons for that, but there are also reported losses on Bank of America (BAC) and Citigroup (C) to contend with, followed by a big whack from Hewlett-Packard (HPQ) after it said it's leaving the personal-computer business.

But no one will be holding charity bake sales for him -- or Bill Gross or any other professional investor -- any time soon.

Here are four high-profile, respected fund managers who have struggled this year:

Gross, who was named Morningstar's fixed-income manager in the decade ending 2009, has seen his $246 billion Pimco Total Return Fund (PTTAX) eke out a mere 3% gain this year, almost half that of the Barclay U.S. Aggregate Bond Index, the fixed-income benchmark.

Pimco Total Return's performance this year puts it in the 88th percentile versus its peers, but the fund beats all but 5% of its peers over the past 15 years.

Gross made no bones about his strategy shift this year: He dumped U.S. debt holdings, principally Treasury and agency bonds, early in the year, saying he expected faster economic growth would contribute to inflation. The Federal Reserve also had been expecting a pickup in economic growth in the second half of the year.

That didn't happen. "The portfolio's 1.1% return from July 1 through Aug. 18 has been subpar, and has dragged its year-to-date return to the group's bottom quartile," reports fund-ranking firm Morningstar.

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