The fund's Treasury holdings fell to zero as of February and in March Gross used derivatives to bet against the securities. Treasuries climbed to 16 percent of the portfolio in August, according to the website of the Newport Beach, California, firm.

In August, Gross told the Financial Times that it was a "mistake to bet so heavily against the price of U.S. government debt."

The Total Return Fund has a different benchmark than the Vanguard index fund, though it has the freedom to invest in the same bonds. Total Return normally stays within two years of the duration of the Barclays Capital US Aggregate Index, which was 5.2 years as of June 30, according to the fund's prospectus. The aggregate index is the main benchmark for most intermediate bond funds, according to Morningstar. Total Return beat that benchmark over 5 and 10 years, Bloomberg data show.

With most active managers underperforming and bond yields at or near record lows, the case for using index funds is just as compelling in fixed income as it is in stocks, said Vanguard's Philips. Bond index funds will match the market's performance over time and gain an edge through lower costs, he said.

The Vanguard Intermediate Bond Fund index charges a fee of 22 cents for every $100 invested compared with a weighted average of 59 cents for actively managed rivals, according to Lipper.

"In a world where bonds are only yielding 2 percent, that cost advantage is important," Philips said.

Index funds' market share has risen to 9 percent of bond mutual fund assets as of Aug. 31, from 3 percent in 2001, Morningstar data show.

The top active managers are still ahead over longer periods. Over five years, Pimco Total Return and Vanguard Intermediate Term Bond fund both gained about 7.7 percent a year, Bloomberg data show.

Over 10 years Gross' fund beat the index fund by roughly 10 basis points annually, Morningstar data show; over 15 years it won by about 25 basis points per year. A basis point is equal to .01 percentage point.

Mark Porterfield, a Pimco spokesman, did not respond to messages seeking comment.