(Adds analyst comment, details on Gross departure)
By Sam Forgione
NEW YORK, Oct 1 (Reuters) - The Pimco Total Return Fund, the world's largest bond fund, posted its weakest monthly return of the year in September, dropping 0.9 percent in the final month with co-founder Bill Gross at the helm, preliminary Morningstar data showed on Wednesday.
The September return was the fund's weakest since last December and trailed 76 percent of peers, the data showed. The Pimco Total Return Exchange-Traded Fund's net asset value, meanwhile, fell 0.5 percent last month, beating 72 percent of peers.
The flagship $222 billion Pimco mutual fund also lagged the benchmark Barclays U.S. Aggregate Bond Index, which posted a loss of 0.7 percent for the month.
The fund likely suffered from a decline in bond prices on expectations that the Federal Reserve would take a more hawkish tone on monetary policy at its September meeting, said Todd Rosenbluth, director of mutual fund research at S&P Capital IQ.
He said the weak performance should concern investors who plan to stick with Pimco after the departure of Gross, Pimco's former Chief Investment Officer, last Friday, as well as those who plan to follow him to his new firm, Janus Capital Group.
"For those that are thinking of moving with Gross, this doesn't help their cause since he isn't going out on a strong note," Rosenbluth said. For investors intent on sticking with Pimco, the September return marks "another month of underperformance, and now you've got new leadership adding in risk," he said.
Gross, the bond market's most renowned investor, quit Pimco for distant rival Janus a day before he was expected to be fired from the huge investment firm he co-founded more than 40 years ago.
Gross managed the Pimco Total Return Fund since 1987. He co-founded Pimco, a $2 trillion asset management firm, in 1971. The Newport Beach, California-based Pacific Investment Management Co. is a unit of German insurer Allianz SE. (Reporting by Sam Forgione; Editing by Chizu Nomiyama and David Gregorio)