Bill Gross Criticizes ‘Total Return’ Bond Funds He Popularized

Bill Gross pioneered the “total return” strategy in the 1980s that revolutionized the once-sleepy bond market.

Now the co-founder of Pacific Investment Management Co., who was ousted in 2014, says many of the funds bearing the name are failing to live up to their mission after suffering heavy losses this year.

Instead of helping to cushion the market downturn, they’ve clung to their benchmarks too closely, essentially becoming “quasi” index-tracking strategies, according to Gross, who created Pimco’s Total Return Fund in 1987, which would eventually become the world’s largest mutual fund at its peak.

In an article published on his website Tuesday, Gross singled out the Pimco product and Jeffrey Gundlach’s DoubleLine Total Return Bond Fund, which have lost almost 17% and 14% this year, respectively. Their benchmark -- Bloomberg’s aggregate bond index -- has fallen 16% this year, as the Federal Reserve’s aggressive policy tightening exacted an unprecedented toll on bond investors.