PIMCO Unconstrained has more leeway to maneuver. Late in 2010, the fund lowered its duration close to zero. So if rates rise, the fund may not suffer any losses. This year, rates have fallen a bit. That has penalized the unconstrained fund. "We were too early," says portfolio manager Chris Dialynas. "We would have been better off if we didn't reduce the duration to zero." So far this year, the unconstrained fund has returned 1.1%, trailing the PIMCO Total Return at 3.0%. The Barclays benchmark has returned 2.7%. Not all the strategies of PIMCO Unconstrained have failed. Convinced that bank balance sheets are improving, the fund has been holding bonds from financial companies. That has helped to boost returns. The fund also scored gains with taxable municipal bonds from California. Despite the mixed showing of PIMCO Unconstrained, investors have poured into the fund. The portfolio has $16 billion in assets, a big showing for a fund that launched less than three years ago. Investors have turned to the fund because they seek protection from rising rates. No-Load Fund Analyst, a respected newsletter, recommends that investors own both PIMCO Unconstrained and PIMCO Total Return. The newsletter argues that the unconstrained fund should deliver strong returns because it represents PIMCO's best thinking -- without benchmark restraints. If the unconstrained fund is so versatile, why bother with PIMCO Total Return? The newsletter says that holding the two funds together provides some diversification. If the economy suffers a shock and interest rates sink, PIMCO Total Return could provide positive returns. The relatively staid approach of the flagship PIMCO fund could provide the ballast that many portfolios need.