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PIMCO Total Return Fund Increased Holdings in Treasuries 2012

For the first time since April 2012, Bill Gross, who runs the world’s biggest bond fund, $281 Billion – PIMCO Total Return Fund, increased holdings of Treasuries from 20% in September to 24% in October.  Treasuries comprised 31 percent of the portfolio in April and were increased to 35 percent over the next two months before Gross began reducing his stake.  Mortgages remained the fund’s largest holding at 47% down from 49% a month earlier.

The Total Return Fund held steady its holdings of non-U.S. developed nations’ debt to 11 percent in October. Gross also kept the fund’s emerging-market debt at 8 percent and its municipal bonds holdings at 5 percent.

He cut investment-grade credit to 11 percent last month, from 12 percent in September. High-yield debt rose to 3 percent, from 2 percent in September.

Gross reduced the Total Return Fund’s net cash-and- equivalent position to negative 9 percent last month, from negative 6 percent in September. The fund can have a so-called negative position by using derivatives, futures or by shorting.

The fund attracted $2.4 billion in October as it continued to outperform peers. The 10th straight month of net deposits into the fund contributed to about $14.5 billion in new cash for the year through Oct. 31, according to the Chicago-based research firm Morningstar Inc. Deposits of $2.8 billion in September were the highest this year.

The Total Return Fund gained 11 percent over the past year, beating 94 percent of its peers, according to data compiled by Bloomberg.

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The chart above shows the performance of the fund since 2011-01-01 to 2012-11-09.  The fund did not perform well because Gross was concerned of the interest rate hike and exit totally from the treasuries.  However, as it turned out, when US officials struggled to agree on raising the debt limit, Treasuries was seen to be the save haven and was the best performance asset class.

Reference: 

Bloomberg, Susanne Walker, 2012-11-10, “Gross Raises Treasuries in Flagship Fund First Time Since April”