Underperformance is just one of many headaches for Gross, who co-founded the Newport Beach, Calif., firm in the early 1970s and until recently was revered as one of the greatest bond market investors ever, dubbed the "Bond King."
First, investors have fled his fund in the past year. In the first two months of 2014, $5.1 billion was pulled by investors. That followed $41 billion of outflows in 2013.
Then, the departure of El-Erian, who had also served as co-chief investment officer alongside Gross and was seen as his heir apparent, drew more unwelcome scrutiny.
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The shakeup raised questions about both the corporate culture at Pimco, which oversees $1.9 trillion of client assets and is now a unit of European financial services company Allianz SE, and about Gross's leadership style.
On Feb. 24, the Wall Street Journal published a report describing how El-Erian's previously close relationship with Gross had soured as the firm's investment performance deteriorated last year. Then Gross told Reuters that his one-time lieutenant was trying to "undermine" him, and that he had "evidence" El-Erian "wrote" the Journal article.
Last week, Morningstar analysts downgraded Pimco's overall stewardship grade by one notch to a C, reflecting a higher degree of uncertainty after the departure of El-Erian and other key personnel. Morningstar analysts also cited reports that Pimco's atmosphere has long been characterized as a "pressure cooker" and that Gross has demonstrated "at-times severe and reputed retaliatory temperament."
February and March were brutal months for the Pimco Total Return Fund's investment strategy.
Morningstar senior analyst Eric Jacobson said the most important issue that hurt Pimco Total Return's performance in March "may have been that it was a blockbuster month for long maturity bonds and a lousy one for shorter maturities."
The Pimco Total Return Fund has been significantly overweight in shorter debt and correspondingly very underweight in long bonds, "so much so in fact that the fund has even been using swaps to achieve a modest short position on the longest maturity debt," Jacobson said in a phone interview in a phone interview.
The Barclays U.S. Treasury 20+ year Index is posting returns of 1.70 percent in March alone, while the Barclays U.S. Treasury 5-7 year Index is -0.61 percent for the same period.
The Pimco Total Return Fund also has long had a significant underweight to investment-grade corporate credit - 9 percent in the fund and 22.7 percent in the Barclays Aggregate - which Morningstar's Jacobson said "didn't help either given that the sector outperformed the broader market overall."
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