Does Star Fund Manager Bill Gross Deserve a Break?

BOSTON (TheStreet) -- Don't bet against the house -- well, at least Bill Gross' house, as represented by his Pimco Total Return Fund (PTTRX), the world's largest bond fund.

The iconoclastic bond fund guru is getting bashed for turning against Treasury bonds in the first quarter of this year when the securities rallied.

Bill Gross

That's when he sold and shorted Treasuries, and other government-related debt securities, citing the nation's debt crisis. He said the failure to properly address that issue would create "low to negative real interest rates."

The eurozone crisis superseded those concerns for many investors, and they stampeded into Treasuries to seek safety. As a result, Gross' fund is underperforming its peers this year, and new money inflows have all but dried up.

The Total Return Fund has a gain of 1.3% this year through Oct. 13, far short of the 6% increase in the Barclays Capital Aggregate Bond Fund Index. Gross' mutual fund is in the bottom 10% in its category this year, according to Morningstar.

The past three months have been particularly tough, as the fund lost 2.3% of its value as Treasuries rose. The Barclay's index gained 2% in the same period.

But give the guy a break. A couple of bad quarters don't mean Gross has lost his golden touch. And how many times have you heard "buy the manager, not the fund"? It still holds here.

Gross recently earned Morningstar's Fixed-Income Manager of the Decade award in the period ending December 2009, which should count for something when trying to pick a bond fund for your portfolio.

Over the past three years, Total Return has a 10.2% annualized advance, placing it in the top third of its peers. It only gets better the longer you look out, including a league-leading 7.2% annual return over 15 years.

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