(Reuters) - In the battle for bond investing bragging rights, Jeffrey Gundlach’s DoubleLine fund emerged as the first-quarter titan, taking in more money from investors than other major mutual fund managers, according to Morningstar data.
Gundlach’s DoubleLine Total Return Bond Fund (DBLTX.O) absorbed $6.4 billion of net new money in the period. That was nearly four times the total taken in by PIMCO’s Total Return Fund (PTTRX.O), led by Pacific Investment Management Co co-founder Bill Gross.
PIMCO’s flagship fund attracted $1.7 billion of net new money, according to Morningstar data.
Other top funds in the first quarter included the Lord Abbett Short Duration Income Fund (LALDX.O), which received over $2 billion in net new money, and TCW’s flagship fund, the MetWest Total Return Bond Fund (MWTRX.O), with $1.46 billion of inflows, Morningstar said.
Morningstar has yet to gather full first-quarter data for two large Vanguard bond funds, but as of February 29, the Vanguard Total Bond Market Index fund (VBMFX.O) garnered $2.8 billion.
Risk has made a huge comeback this year on signs of improvement in the U.S. economy, especially job growth. But investors are still pouring money into not only equity funds, but fixed-income funds as well.
The search for yield and the appetite for risk-taking have driven investors into these bond funds, because they throw off income that outpaces the paltry rates offered by Treasuries.
Moreover, balance sheets of many companies are stronger than ever as they’ve shrunk debt and other obligations, said Dan Fuss, vice chairman of Loomis Sayles, who is a fan of corporate bonds. Fuss’ Loomis Sayles Bond Fund (LSBDX.O), which had $542 million of net new cash in the first quarter, also is a big beneficiary of the flight to risk-taking, with returns of 6.59 percent in the first three months of the year.
But Gundlach, who was crowned by Barron’s as the new “King of Bonds” a year ago, has become the standout performer.
DoubleLine ended the first quarter of 2012 with $31 billion in assets under management across all DoubleLine open-end mutual funds, separate accounts, hedge funds and subadvised mutual funds. That’s a huge increase from DoubleLine’s $22 billion in assets under management at the end of 2011.
The flow of new money into Gross’ Total Return Fund in the first quarter comes after investors pulled some $5 billion from his fund in all of 2011, according to Morningstar. In his long history of managing money, it’s a rare event for Gross to show negative outflows in a single year.
Investors and advisers generally prefer intermediate bond funds such as PIMCO’s Total Return and DoubleLine’s Total Return bond funds for the diversification benefit. Over the past 20 years they have brought lower average total returns — 6.6 percent versus 8.6 percent — but also less volatility than simply a long-duration Treasury strategy, said Jeff Tjornehoj, Head of Lipper Americas Research.
Tjornehoj notes that the Barclays U.S. Treasury 10-20 Years index has beaten the Barclays U.S. Aggregate 13 of the past 20 years. “But when you have a year like 2009 when long-term Treasuries lose 8 percent and the Agg earns 6 percent, it’s easier to make the case for short-term capital preservation over long-term outperformance.”
Reporting By Jennifer Ablan; edited by Matthew Goldstein and Dan Grebler