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PIMCO Total Return Fund May 2013

PIMCO Total Return Fund, the world largest bond fund with $292.9 B, managed by Bond King, Bill Gross, returned 6.8% over the past year, beating 90% of its peers.  On 2013-05-11, he twitted that the his ‘gut feel’ says bond bull market has “likely ended” on 2013-04-29 and that fixed-income returns will probably be in the range of 2% to 3%.

As of end of April 2013, PIMCO Total Return Fund allocation is as follows relative to March’s:

  1. Increased US Treasurys which includes notes, bonds, futures, and inflation-protected securities to 39% from 33%.  The highest level of Treasury holdings in Total Return Fund in over a year.
  2. Mortgage holdings rose to 34% from 33%
  3. Emerging Market Debt increased from 7% to 8%
  4. Money market and net cash equivalents decreased from –3% to –8%, the negative number indicates the use of derivatives and other short-term instruments as collateral to increase investing capability.

Gross is “bullish” on Treasurys as he see the potential outflow of investor money from Japan as the Bank of Japan began monetary easing policies that would send investors in search of foreign opportunities with higher yield.  “We are beginning evidence of just that, with the Japanese Ministry of Finance saying Friday that foreign investments were higher than domestic for the week ending May 4.

Reference:

  1. MarketWatch, The Tell, 2013-05-10, “Bill Gross says Bond Bull Market is Over, Buy Treasurys”
  2. Bloomberg, Paul Cox & Alexis Leondis, “Gross Says Bond Bull Market Probably Ended April 29”