Recovery of Pimco Total Return Fund Losses

Wednesday, July 3rd, 2013

The White Law Group is investigating whether brokerage firms misrepresented or downplayed the risks of certain long duration bond funds?  If so, these firms may be help responsible for any losses through a FINRA arbitration claim.

The Pimco Total Return Fund, the world’s largest mutual fund, capped off the second quarter’s bond beat down with its worst month ever.

The $268 billion Total Return Fund, run by Bill Gross, fell 2.57% in June, its worst monthly loss ever. The lousy performance came on the heels of a 1.9% drop in May.

For the quarter, the fund dropped 3.7%. That put it behind 95% of intermediate-term-bond funds, according to Morningstar.

When disclosing the risk of a particular bond offering, a financial advisor must make the investor fully aware of the following risks associated with all bonds: (1) Inflationary risk – i.e., the risk that fixed-income investments historically underperform other investments during times of inflation; (2) Credit risk – i.e., the risk that the company offering the bond could be downgraded by reporting agencies (such as Moody’s) affecting the value of the bond, and (3) interest rate risk – i.e., the risk that the value of the bond could decrease if interest rates increase (this is precisely the risk that is currently present in the bond market and which must be disclosed by a broker before recommending a bond to any client).

In today’s investment climate, the big disclosure that a broker must make has to do with interest rate risk.  With interest rates at all time lows, history tells us that the risk that current long term bonds will reduce in value when/if rates increase is quite high.  If a financial advisor failed to disclose this potential risk of investing in bonds, and instead represented that investing in bonds is “safe,” then the investor may have a claim for failure to adequately disclose the true risks of investing in bonds at historically low yields.

If you suffered losses in the iShares Barclays 20+ year treasury bond fund and would like to discuss your litigation options, please call the securities attorneys of The White Law Group at 312/238-9650 for a free consultation.

The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Boca Raton, Florida.

For more in formation on the firm, visit http://www.whitesecuritieslaw.com.

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