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Does Star Fund Manager Bill Gross Deserve a Break?

Investors are largely avoiding Gross' fund this year. They've given him about $183 million to invest, compared with $18 billion last year and $58 billion in 2009, the Wall Street Journal reported, citing Lipper data.

But why pick on Gross for that, when all taxable bond fund inflows were at $93 billion through Sept. 30, or about 58% of what they were in the same period last year? Investors have hemmed and hawed over the appeal of bonds and bond funds this year as a rally seemed to get ahead of itself with the yield on the 10-year Treasury sinking to less than 2%.

And looking at the big picture, Total Return is already the biggest actively managed mutual fund, with assets of $242 billion. One has to wonder if Gross is interested in taking in more money at this point.

Gross clearly erred in his strategy early this year, Morningstar bond fund analyst Eric Jacobson said last month, but "the error did little to harm this fund's stellar long-term record, and, far from signaling a fund hamstrung by its size, relatively dramatic changes to its composition in the past year actually suggest the opposite." That's because his decision to boost non-index bets, something that many fund managers don't have the guts to do, "has solid logic behind it."

And such a move "has also highlighted the occasional risk of underperformance versus the broad market that he and many others have been taking by stepping away from the most liquid, benchmark-dominating sectors," Jacobson said.

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.
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