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How About a Little PIMCO Helper?

You might need a little non-PIMCO exposure.

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Do you own  Harbor Bond (HABDX), Ohio CollegeAdvantage 529 Savings Plan, and Schwab Target 2020 Fund? If so, you own  PIMCO Total Return (PTTRX), in varying degrees, in three different products. If your 401(k) plan is like Morningstar's, it may also offer PIMCO Total Return. If you go to a financial planner or broker, he or she might recommend Total Return, too.

Total Return everywhere may be a case of too much of a good thing. The fund's insanely large asset base of $252 billion (plus another $236 billion that PIMCO runs with the same approach elsewhere) has led manager Bill Gross and his team to increase their use of derivatives to execute their strategy. Clearly, they know what they're doing, and they continue to make savvy big-picture calls--such as anticipating the housing downturn in 2007 and, recently, shifting into Treasury bonds, which have delivered fine results this year.

Given the size of the fund, it makes sense for Gross to rely on top-down forecasts to manage it. Adding a few corporate bonds here and a few foreign issues there just won't have much impact on the fund's performance.

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Russel Kinnel has a position in the following securities mentioned above: PTTRX, FTABX, LSBRX, PRHYX. Find out about Morningstar’s editorial policies.