Bill Gross' Pimco Total Return Fund, the world's largest mutual fund, was the second-biggest decliner among the largest U.S. bond managers in the past month as clients pulled money for the first time in two years amid a sell-off in Treasuries.

The $250 billion Pimco Total Return fell 3% in the 30 days through Dec. 8, trailing all but one of the 10 largest bond mutual funds, which lost an average of 2%, according to data compiled by Bloomberg. Only the $33 billion Vanguard Inflation-Protected Securities Fund declined more, by 3.9% in the period.

Benchmark 10-year Treasuries had their biggest two-day slump since September 2008 last week after tax cuts, signs of an economic recovery and asset purchases by the Federal Reserve fueled expectations inflation will accelerate. The losses may surprise investors who poured $267 billion into fixed-income funds this year through October, ignoring warnings by Gross that the 30-year bond rally may have run its course.

"This is a very violent move we had this week," said Richard Saperstein, managing director at Treasury Partners in New York, which oversees $10 billion of assets. "I think we're going to have a very volatile bond cycle here over the next two years."

Assets in Pimco Total Return declined by $5.75 billion last month as the fund fell 1.4%. It has declined another 1.2% this month through Thursday, which would translate into a loss of $3 billion before any investor deposits or withdrawals. The assets are reported monthly.

The fund gained 8.1% per year in the five years through Dec. 8, better than 98% of peers, according to Bloomberg data.

Pimco Total Return, which became the biggest mutual fund in history last year, had its first net withdrawals in two years in November as investors pulled $1.9 billion, Morningstar Inc. said Thursday.

Pacific Investment Management Co., which manages the fund, Thursday raised its forecast for U.S. economic growth next year as policymakers pump a "massive amount" of stimulus into the economy, Chief Executive Mohamed El-Erian said.

Pimco projects the economy will grow 3% to 3.5% in the fourth quarter of 2011 from this year's fourth quarter. That compares with its previous estimate for 2% to 2.5% growth and the 2.2% gain forecast for this year by the International Monetary Fund. "The U.S. is using fiscal and monetary policy to try to attain escape velocity for the economy," El-Erian said in a telephone interview from his office in Newport Beach, Calif. "What we don't know yet is whether that will be enough not just to change the economy's trajectory for one year but to place it on a medium-term sustainable path."

Pimco, Vanguard Group Inc. and Franklin Resources Inc. attracted the most money to their bond funds this year through November, according to Morningstar data. Pimco pulled $57 billion into its bond funds this year through Nov. 30. Vanguard, of Valley Forge, Pa., got $33.4 billion, and Franklin, of San Mateo, Calif., received $23.7 billion. "Fixed income has been the lifeline for a lot of these firms," Douglas Sipkin, an analyst with Ticonderoga Securities, said in a telephone interview.

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