Gross Raises Government-Related Debt to 50% of Flagship Fund

Jun 11, 2014 7:48 am ET

(Updates fund performance beginning in third paragraph.)

June 11 (Bloomberg) -- Pacific Investment Management Co.’s Bill Gross raised his holdings of Treasuries and government- related debt in May to half his flagship fund’s total as the securities gained the most in four months.

The proportion of the securities in the $229 billion Total Return Fund was 50 percent last month, up from 41 percent in April, data on the company’s website showed. It was the highest since 54 percent in July 2010 for the world’s biggest bond fund.

Gross, 70, is seeking to stanch 13 straight months of redemptions, saying the fund that’s trailed 62 percent of peers during the past 12 months, according to data compiled by Bloomberg, will again rank at the top by the end of the year. Pimco is betting on a “new neutral” era characterized by global growth converging toward lower, more stable speeds and interest rates that remain below their pre-crisis equilibrium.

The fund is in the midst of “one of the most significant performance turnarounds in our history,” Newport Beach, California-based Gross said on Bloomberg Radio June 6. “There is going to be fear on our competitors’ faces again. The game is on, and Pimco is back.”

The fund gained 0.2 percent in the past month, according to data compiled by Bloomberg.

Mortgage Bonds

Mortgage-bond holdings rose last month to 22 percent, from 19 percent, the lowest level since July 2010. Holdings of money- market debt and cash-equivalent securities were negative 9 percent, compared with 5 percent the previous month.

Pimco cut its holdings in the U.S. credit category, which includes investment-grade and high-yield securities, to 11 percent, from 12 percent in April, according to the data.

Gross raised the Total Return Fund’s holdings of emerging- market bonds last month to 8 percent, from 7 percent. He raised non-U.S. developed debt to 13 percent, from 11 percent, the website data show.

The Total Return Fund’s U.S. government-related category includes holdings of U.S. Treasury notes, bonds, agency debt, interest-rate swaps and inflation-protected securities.

Pimco, a unit of the Munich-based insurer Allianz SE, doesn’t comment directly on monthly changes in holdings or specific types of securities within a market sector.

The Total Return Fund’s U.S. government-related category includes holdings of U.S. Treasury notes, bonds, agency debt, interest-rate swaps and inflation-protected securities.

The fund has gained 2.8 percent this year, beating 36 percent of its peers. Last year it lost investors 1.9 percent, the most since 1994, trailing 65 percent of peers.

The Bloomberg U.S. Treasury Bond Index rose 1 percent in May, the most since gaining 1.8 percent in January and pushing its gain for 2014 to 2.7 percent. The index declined 3.4 percent last year.