Pimco Increases Holdings of Treasuries in Flagship Fund

Pacific Investment Management Co.’s Bill Gross raised holdings of Treasuries and other U.S.- government-related debt in his flagship fund in July to 39 percent, the highest level since April.

The proportion of U.S. government debt in the $262 billion Total Return Fund increased from 38 percent in June, according to data on Pimco’s website. The Newport Beach, California-based company doesn’t comment directly on monthly changes in holdings or specific types of securities within a market sector.

The Total Return Fund had its third straight month of withdrawals in July as investors continued to flee bonds. Clients pulled an estimated $7.5 billion from the fund, leaving it with $262 billion in assets at the end of the month, the research firm Morningstar Inc. said Aug. 2 in an e-mailed statement.

The flight from bond funds was triggered by Federal Reserve Chairman Ben S. Bernanke, who rattled markets in May and June by outlining prospects of ending the central bank’s unprecedented asset purchases.

The yield on Treasury 10-year notes surged to as high as 2.75 percent on July 8, from a 2013 low of 1.61 percent on May 1. It closed at 2.58 percent today.

Mortgage Securities

Gross, Pimco’s co-founder and co-chief investment officer, also cut holdings of mortgage securities, the fund’s second-largest holding, to 35 percent last month, from 36 percent in June.

Pimco also shaved non-U.S. developed nations’ debt to 3 percent, from 5 percent in June. U.S. credit, which includes investment-grade and high-yield securities, was at 9 percent. The category was previously known as investment grade and totaled 6 percent in June.

The Total Return Fund (PTTRX)’s emerging-market debt holdings were cut to 6 percent in July, from 7 percent the previous month.

Over the past five years, the Total Return Fund has returned 7.39 percent, outperforming 92 percent of competitors. It gained 0.6 percent over the past year, placing it in the 74th percentile of its category, 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, agency debt, interest-rate swaps and inflation-protected securities.

Pimco, a unit of the Munich-based insurer Allianz SE (ALV), managed $1.97 trillion in assets as of June 30.

To contact the reporter on this story: Susanne Walker in New York at swalker33@bloomberg.net

To contact the editor responsible for this story: Robert Burgess at bburgess@bloomberg.net

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