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Fund Spy

A Gross Paradox

PIMCO's Bond King blasts high fund fees, something the King's Court knows plenty about.

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Bill Gross dropped a bomb last week, and it was called "Investment Potions," the August edition of his Investment Outlook column.

"�those who sell investment 'potions' must wrap their product with an extra large ribbon because history is not on their side. Common sense would dictate that the industry as a whole cannot outperform the market because they are the market, and long-term statistics revealing negative alpha for the class of active managers confirms it. Yet, what a price investors are willing to pay!"

If that was the shock wave, the blast was right behind. Gross quoted data citing 1% and 0.75% average expense ratios for stock and bond funds respectively, ripped money market funds charging 38 basis points, and called the whole thing an "extreme absurdity."

Eric Jacobson has a position in the following securities mentioned above: PTTRX, PTTAX. Find out about Morningstar’s editorial policies.