Why are Bill Gross’s Number 1 Picks not Part of His Total Return Fund?Author: Marc ProsserLast Updated: December 12, 2012 What are Bill Gross’s Best Investment Ideas?PicksCommodities like Oil and GoldU.S. Inflation-Protected BondsHigh-Quality Municipal BondsNon-Dollar Emerging-Market StocksPansLong-Dated Developed-Country Bonds in the U.S., U.K. and GermanyHigh-Yield BondsFinancial Stocks of Banks and Insurance CompaniesThe above picks and pans were originally published in an article for Time Magazine. Bill Gross re-printed them in his December 2012 monthly investment commentary, eliminating any doubt about the strength of his views regarding these investment themes. How do these views stack up against the investments in the PIMCO Total Return Fund?Investment IdeasDoes the PIMCO Total Return Fund Own This?Oil & GoldNoTreasury Inflation Protected Bonds (TIPS)YesHigh Quality Municipal BondsYesEmerging Market StocksNoWhile the PIMCO Total Return Fund and Bill Gross are synonymous in most investor minds, it is important to remember that the fund has limitations from which Bill Gross cannot deviate. Primarily it is a bond fund, which means that it cannot buy stocks or commodities.For the last three decades, this limitation did not impact the fund’s ability to deliver high single digit or double digit returns. In general, bond values rose and the PIMCO Total Return Fund did a couple percent better than typical intermediate term bond fund. However, Bill Gross is not optimistic about bonds, primarily because he is concerned about inflation. Just as bonds have been in a generational period of falling rates, he sees decades of rising rates resulting from inflation. This is very bad news for the PIMCO Total Return Fund.Bill Gross is in a bit of a quandary. I think he wants to tell people to stop investing in the PIMCO Total Return Fund and invest in other funds that are better suited to an inflationary environment like the PIMCO Real Return Commodity Advantage Fund (which holds gold and oil). However, I believe his concern is investors that leave Total Return they will invest somewhere else. In other words, investors think of Bill Gross as the world’s best bond manager. They might not think he is the world’s best money manager.I would consider getting out of the PIMCO Total Return Fund and perhaps follow the investment theme’s laid out by Bill Gross. For each idea, I have given a PIMCO managed investment and a low cost ETF alternative.Investment IdeaPIMCO Fund or ETFLow Cost ETFOIL & GoldPIMCO Real Return Commodity Advantage FundGLD, OILTreasury Inflation Protected BondsTIPZTIPZHigh Quality Municipal BondMUNIMUBEmerging Market StockPIMCO Eqs Emerging Markets FundsLEMBWhat do you think? Let us know in the comments section below.