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Pimco Total Return Fund rises 1.8 percent in September: Morningstar

The headquarters of investment firm PIMCO is shown in this photo taken in Newport Beach, California January 26, 2012. REUTERS/Lori Shepler

NEW YORK (Reuters) - The Pimco Total Return Fund, the world's largest mutual fund, rose 1.8 percent in September after the Federal Reserve kept its bond-buying program unchanged, preliminary data from investment research firm Morningstar showed Tuesday.

The return marks the best monthly performance for the bond fund since January 2012, according to the Chicago-based Morningstar. The fund's latest monthly performance also bested 98 percent of peers for the month, according to Morningstar.

"The Fed decision to continue to keep their bond-buying program intact contributed favorably," said Todd Rosenbluth, director of mutual fund research at S&P Capital IQ, on the fund's gain. The fund, which is run by Bill Gross, has roughly $251 billion in assets.

The Fed's decision on September 18 to keep its $85 billion in monthly purchases of Treasuries and agency mortgages unchanged led some investors to buy bonds again after a selloff that began in May.

The yield on the 10-year U.S. Treasury note plunged 17 basis points following the Fed decision. As yields fall, prices rise.

Gross's fund had 35 percent of its assets in U.S. government-related debt and 36 percent of its assets in mortgages at the end of August, according to firm's website.

Despite the rise in September, Gross's flagship bond fund is still down 1.9 percent for the year, besting 49 percent of peers, according to Morningstar.

The Newport Beach, California-based Pacific Investment Management Co had $1.97 trillion in assets as of June 30, according to the firm's website. The firm is a unit of European financial services company Allianz SE.

The Pimco Total Return Exchange-Traded Fund, an actively managed ETF designed to mimic the strategy of the flagship bond fund, also did well and rose 1.7 percent for the month, making it the top performer in its peer group, according to Morningstar data.

Jeffrey Gundlach's DoubleLine Total Return Bond Fund, a competitor to the Pimco Total Return Fund, rose 1.2 percent in September, besting 79 percent of peers, according to preliminary Morningstar data.

The fund, which had its biggest-ever monthly outflows of $2.1 billion in September, is up 0.3 percent for the year, outperforming the comparable Pimco fund and besting 95 percent of peers, according to Morningstar.

The Los Angles-based DoubleLine Capital LP had $57 billion in assets as of June 30.

(Reporting by Sam Forgione; Editing by Meredith Mazzilli)