Pacific Investment Management Co.’s Bill Gross cut the holdings of Treasuries in his flagship fund even as he says the Federal Reserve is unlikely to reduce its unprecedented asset-purchase program in the near-term.
The proportion of U.S. government securities in the $285.16 billion Total Return Fund declined to 37 percent in May, from 39 percent in April, a level that was the highest since July 2010, according to data on Newport Beach, California-based Pimco’s website yesterday. Mortgage holdings were maintained at 34 percent, while municipal holdings were reduced to 4 percent, the lowest since July 2012, from 5 percent. The company doesn’t comment directly on monthly changes in its portfolio holdings.
Gross, co-founder of Pimco and manager of the world’s biggest bond fund, has been advising investors to sell riskier assets and buy government debt, including inflation-linked securities and nominal Treasuries, as central banks pursue unprecedented stimulus measures.
“We’re sticking with bonds as long as Fed does,” he wrote in a Twitter post on June 4.
The Fed will reduce its bond purchases to $65 billion a month at its Oct. 29-30 meeting, according to the median estimate in a Bloomberg survey of economists conducted June 4-5. The central bank currently buys $85 billion of Treasuries and mortgage securities each month to put downward pressure on borrowing costs.
Gross cut his holdings of non-U.S. developed nations’ debt to 7 percent in May, the lowest level since August, from 10 percent in April. Investment-grade credit holdings fell last month to 6 percent from 7 percent.
The Total Return Fund (PTTRX:US)’s emerging-market debt holdings were cut to 7 percent, from 8 percent in April. The fund’s net cash-and-equivalent position was at 0 percent in May, compared with negative 8 percent the previous month.
Global bonds had their worst month in nine years in May, led by Treasuries, as investors sold debt in anticipation that central banks will eventually scale back unprecedented asset purchases.
The selloff left Gross’s Pimco Total Return Fund trailing competitors in the past month when it lost investors 2.43 percent, beating just 7 percent of its peers.
Gross’s fund suffered the first client withdrawals since 2011 in May, with clients pulling out $1.3 billion, according to estimates from Morningstar Inc. in Chicago.
Over the past five years, Gross’s fund has advanced 7.8 percent, ahead of 94 percent of competitors.
The fund returned 3.62 percent over the past year, beating 81 percent of its peers, according to data compiled by Bloomberg.
The Total Return Fund’s government and Treasury debt category includes fund holdings of U.S. Treasury notes, bonds, futures and inflation-protected securities.
Pimco, a unit of the Munich-based insurer Allianz SE (ALV), managed $2.04 trillion in assets as of March 31.
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