Revenge of the Bond Kings!

Once upon a time (2009-2011), we thrilled at the exploits of our new star investment managers, the Bond Kings, and everyone threw all of their money at them in lieu of buying stocks. And then, because God has a tremendous sense of humor, the stock market proceeded to leave all poor, dumb bastards in the dust, ripping 40% higher to an all-time record. This while bonds did nothing and even lost money in real terms.

Investor assets fled the funds of the Bond Kings as the siren song of the stock market commanded the attention of backward-looking asset allocators everywhere. But now, there has been some payback. The US stock market is off to one of its worst starts ever and bonds are catching a bid once again.

The Wall Street Journal checks in on the Kings at an auspicious moment…

Some large U.S. bond funds reaped the windfall of a surprising turn in global financial markets since the start of the year as investments in Treasury bonds rallied and riskier bets went sour.

Among the winners is Jeffrey Gundlach’s $31 billion DoubleLine Total Return Bond Fund at DoubleLine Capital LP. The fund, which invests in high-grade U.S. mortgage-backed securities and Treasury bonds, handed investors a return of 2.21% in January, beating 99% of its peers, according to fund tracker Morningstar Inc.MORN +2.02% The fund returned 0.02% in 2013.

Bill Gross’s $237 billion Total Return Fund at Pacific Investment Management Co. also scored last month with a return of 1.35%. Mr. Gross’s fund, with large holdings of U.S. Treasury debt and high-quality mortgage securities, recorded a loss of 1.92% in 2013, the fund’s largest annual loss since 1994.

Another laggard is Dan Fuss’s $22 billion Loomis Sayles Bond Fund at Loomis Sayles & Co., which posted a small loss of 0.02% last month after a 5.88% return in 2013. Mr. Fuss long has favored riskier bonds such as those issued by low-rated companies, which have performed poorly this year as investors flocked to high-quality bonds.

The game, as they say, is afoot!


Jeffrey Gundlach, Bill Gross Reap Windfalls From Treasury Rally (WSJ)

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