I have written many times about the perils of "go anywhere (also known as unconstrained) bond funds. As is (or should be) clear from the label the funds can invest in assets well beyond those that would make up the stable assets that most investors seek in the bond allcation of their portfolio. Rather than investing in an asset class the investor is really betting on the future success of the "star manager".
The prime example of this was the Pimco Total Return bond fund managed by "bond king" Bill Gross. While Pimco marketed the fund as a "core holding" for investors it was in fact far closer to a risky hedge fund than the time of fund that would be a good choice for a core bond holding.. After many years of strong performance and investment chasing investors which made it one of the largest mutual funds in the world, the fund began to turn in sub par performance and the assets came rushing out. Gross was ousted in a much publicized controversial episode still the subject of a lawsuit with over $100 million in dispute.
Gross has moved to Janus Capital where he manages the Janus Unconstrained bond fund. But to say he has moved on would hardly be correct. As described in this NYT article Gross is nothing short of obsessed at his new funds perfrmance vs. Pimco Total Return...and he measures that performance on a daily basis:
Latin American credit default swaps (yes credit swaps the intrument so well explained by Selena Gomez and Prof Richard Thaler in the movie the Big Short)
Gross, never one to hide from the media spotlight appeared recently on CNBC to tout two other holdings in his unconstrained bond fund: the stock of brewer SAB Miller s and a preferred stock ETF !