Pimco Funds Outperform Bond Portfolios - TheStreet

NEWPORT BEACH, Calif. (TheStreet) -- Pimco, manager of the world's-largest bond fund, managed three of the top 10 fixed-income mutual funds in November.


Pimco EM Fundamental IndexPLUS TR Strategy Fund

(PEFIX) - Get Report

, managed by Bill Gross, rose 5.8% in November, ranking it No. 1. The fund, which has doubled in the past year, uses intermediate-term debt as collateral to buy total return swaps to mirror the return of the Enhanced Research Affiliates Fundamental Index of emerging markets. It aims to generate returns by combining actively managed bond portfolios with derivative contracts. While derivatives can multiply as volatility when used for leverage, Pimco's strategy attempts to create equity exposure that's less risky than owning stocks. This Pimco fund is too new to have a rating from



The third-best fund, the

Pimco Real Return Asset Fund

(PRAIX) - Get Report

, returned 4.1%. The No. 8 fund, the

Pimco Foreign Bond Fund Unhedged

(PFUIX) - Get Report

, advanced 3.7%. While the Real Return Asset Fund performed better, the Foreign Bond Fund has a higher rating at B, or "buy."

The Foreign Bond Fund can invest in futures, options and swap derivatives. The portfolio owns foreign debt like any conventional bond fund, but unlike other funds, the securities are held in the original currency. As the dollar declines in value, the fund can benefit. Its currency weightings are 43% euro, 41% Japanese yen and 7.9% UK pound. The fund also has U.S. dollar-based investments in the debt instruments of

Bank of America

(BAC) - Get Report



(C) - Get Report



(F) - Get Report


Goldman Sachs

(GS) - Get Report


Home Depot

(HD) - Get Report


The other "buy"-rated fund on the list, the

Evergreen International Bond Fund

(ESIYX) - Get Report

, increased 3.6%. This caps off a 12-month gain of 28% that brings its three-year average return to 11%. The fund limits its exposure to currencies of developing countries, and makes country selection and currency decisions based on its own research. One drawback of this fund is the 4.75% front load. Notable holdings include the debt of

Procter & Gamble

(PG) - Get Report


General Electric

(GE) - Get Report



(PFE) - Get Report



(MCD) - Get Report


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Reported by Kevin Baker in Jupiter, Fla.


10 Best PIMCO Mutual Funds for 2011 >>

Kevin Baker became the senior financial analyst for TSC Ratings upon the August 2006 acquisition of Weiss Ratings by TheStreet.com, covering mutual funds. He joined the Weiss Group in 1997 as a banking and brokerage analyst. In 1999, he created the Weiss Group's first ratings to gauge the level of risk in U.S. equities. Baker received a B.S. degree in management from Rensselaer Polytechnic Institute and an M.B.A. with a finance specialization from Nova Southeastern University.