PIMCO Total Return, run by star manager Bill Gross, accounted for $9.9 billion of outflows -- about 3.5% of the fund's assets at the end of May. The fund fell 2.6% in June, Morningstar says, its worst monthly performance since 2008.
The redemptions were the biggest since Morningstar began keeping records in 1993, according to Reuters.
Bond funds have been hit hard since the May 2 low in the 10-year Treasury note yield. Bond prices fall when interest rates rise, and rates have risen a full percentage point since May 2 to 2.63%.
The scope of the bond outflows is huge. For example, iShares iBoxx $ Invesment Grade Corporate Bond fund, an exchange-traded fund, had $22.7 billion in assets the end of May. It has $19.3 billion now, a $3.4 billion decline. The fund's value has fallen 3.7% since May 30, including reinvested dividends.
Intermediate-term bond funds were the biggest losers in June, shedding an estimated $21.5 billion, according to Lipper, which tracks the funds. Investors pulled $13.5 billion from high-yield junk-bond funds.
Morningstar analysts Tim Strauts and Eric Jacobson, however, say that the turbulence in the bond market is no reason to sell PIMCO Total Return, as the fund has an excellent long-term track record and solid management.
Allianz SE, the European money manager, owns PIMCO. The firms' combined assets were $2.04 trillion. "PIMCO is a long-term investor and the Total Return Fund has been one of the top performing intermediate bond funds during the fund's 26-year history, delivering investor value over a myriad market cycles," says PIMCO spokesman Mark Porterfield.