In the fixed-income investing industry, PIMCO is one of the 800-pound gorillas. The firm boasts more than $700 billion in net assets, and founder Bill Gross is one of the most respected managers in the business. So a recent announcement that his firm would begin to make riskier investments intrigued many investors. Why is PIMCO suddenly cranking up its risk when a likely economic slowdown looms?

Ratcheting up the risk
In a recent PIMCO investment outlook, Gross stated that its more conservative, domestic strategy had cost the firm greater returns in the past few years. PIMCO had overweighted shorter-term bonds and underweighted other, more volatile assets, dampening its returns. According to Gross, the firm will now focus on higher-risk areas such as commodities and local-currency emerging-market debt.

In related news, a recent article in the National Review Online suggests that Bill Gross may be in danger of losing his title as "savviest bond manager." PIMCO suffered from subpar performance last year, with its flagship Total Return Bond Fund (PTTAX) landing in the bottom quartile of its peer universe. The article noted Gross's previous missteps, including his September 2002 prediction that the market would fall by another 30%. In fact, the bear market was just ending, and the market subsequently took off. The article questioned whether Gross was losing his touch.

Hmmm. Does anyone else think these two news items just might be related?

Cause and effect
Anytime funds or managers falter, especially high-profile ones like Bill Gross, critics rush to point out their mistakes. Being put on a pedestal in the investment world only makes your fumbles that much more visible. Is Bill Gross losing his touch? It's possible, but you can't make that judgment based on one year of bad performance in 2006 and a blown market call in 2002. Even the greatest managers have an off year now and then. If you start second-guessing managers in the rare times they stumble, you're setting yourself up for a losing game of chasing performance.

More to the point, could PIMCO's recent performance woes be driving the push for more risky investments? If a fund has a bad year, even after many good ones, investors always pressure managers to explain the shortfall and recoup returns in subsequent years. Just ask Bill Miller.

If Gross and the folks over at PIMCO truly find more value in "risky" bond sectors, great. But if they're just hoping to juice returns and make up for lagging performance, look out. Whenever managers veer away from their core strategy in hopes of boosting returns, investors should beware.

Kicking it up a notch
What does this push for riskier investments mean for PIMCO fundholders? Well, investors in the Total Return Bond Fund, which makes up almost one-seventh of PIMCO's total firm assets, could see their fund holdings change. Currently, the firm's mandate allows management to allocate as much as 20% of assets in securities denominated in foreign currencies, and as much as 10% in high-yield investments. The fund already relies heavily on derivatives -- according to Morningstar, they're a majority of its assets. And given the fund's size, it's unlikely that Gross will be able to move as nimbly in the domestic corporate bond market going forward. All these signs suggest that the fund will increasingly move away from traditional bond holdings and into more obscure corners of the market.

But investors shouldn't start worrying yet. I'm not totally convinced that this move to riskier investments is more than a step to juice returns, but given Bill Gross's track record, I'd give him the benefit of the doubt. Investors in the Total Return Fund should know that their fund's spicy side may get a little hotter in the coming months. If you lack a taste for spicier investing, consider seeking fixed-income exposure elsewhere. But everyone else should hold tight. Despite some missteps, Gross has earned his reputation for a reason. Most investors should be willing to take a bet on that.

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Fool contributor Amanda Kish lives in Rochester, N.Y., and does not own shares of any of the funds mentioned herein. The Fool has a disclosure policy.