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The 4% Portfolio is designed to provide a smarter way for retirees to follow the 4% rule without having to sell a portion of their stock portfolio each year. Our portfolio is based around financially sound corporations spread across multiple industries who reward investors through regular... More
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  • PIMCO Total Return Mutual Fund Analysis 0 comments
    Nov 7, 2013 11:52 AM

    PIMCO Total Return (PTTAX) is the world's largest bond fund with nearly $250 billion in total assets. The fund is managed by Bill Gross, one of the most highly regarded bond investors in the world. PTTAX has performed well vs its peers and delivered solid returns for investors looking for income. When looking at its performance, once can easily see why it is such a popular income mutual fund. But lets take a look at what the sales brochure for PTTAX won't highlight for you.

    Based on our assumptions here, let's take a look at the fees, turnover and holdings of PIMCO's Total Return A bond fund.


    PTTAX not only has an annual expense ratio near 1.0%, but it also has the dreaded front-end load sales fee. If your investment adviser is recommending PTTAX, one of their motivations may be because they get a piece of that front-end load sales fee. The front-end load fee is a staggered fee with different expense rates depending on how much you are investing. Based on our example $500,000 investment, below is the initial fee that will be paid when you invest in PTTAX.

    Due to this front-end load fee, your initial investment of $500,000 is immediately reduced by $14,250 giving you a beginning investment of $485,750.

    Based on our historical expense ratio data for PTTAX, lets take a look at how much is generated in fees over a 5 year time frame.

    (click to enlarge)

    Turnover & Holdings

    As of 3/31/2013, PTTAX had an average annual turnover rate of 380%. This is a very high rate and shows management is constantly replacing its holdings.

    As of of 3/31/2013, PTTAX had the following Portfolio allocation.

    • Cash: 9.33
    • Stocks: 0.00
    • Bonds: 69.51
    • Other: 1.47

    Of this Portfolio composition, the largest holdings of PTTAX outside of cash are:

    • US Treasury Note 1.625% (Treasury bill)
    • Fannie Mae Single Family TBA 3% 2043-04-01 (Mortgage-backed security)


    PTTAX has had success generating income for investors and outperforming its peers. But anyone considering an investment in PTTAX should be aware of the fees they will pay, the high amount of activity management needs to generate these returns, and what underlying investments their money is going to.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Additional disclosure: The 4% Portfolio Retirement Service has made no recommendations on PTTAX.

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