Bill Gross, the US bond fund manager, provided proof of the merits of buying into “distressed” debt this week when he revealed that Pimco’s total-return fund had earned $1.7bn following the US government’s takeover of home loan groups Fannie Mae and Freddie Mac.

Gross – who has managed the world’s largest bond fund since 1987 – began shifting money from US Treasuries and corporate bonds into ‘agency bonds’ guaranteed by Fannie Mae and Freddie Mac earlier this year, wagering that the US government would move to support the two groups.