Pimco’s Gross Maintains Biggest Position in Government Debt

Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co. and is recommending short-term debt, maintained his biggest holdings in Treasuries and U.S. government-related securities in November.

The proportion of the securities in the $244 billion Total Return Fund (PTTRX) was 37 percent, unchanged from October, based on data from the company’s website. Mortgage debt held at 34 percent, while U.S. credit was unchanged at 10 percent. Holdings of money market debt and cash-equivalent securities rose to 5 percent from 4 percent.

Gross has been recommending shorter-term Treasuries as the Federal Reserve weighs tapering its bond purchases. Shorter maturities “are less susceptible to higher interest rates” as the Fed, the biggest buyer of longer-dated Treasuries, is poised to taper, he said Dec. 6 on Bloomberg Radio.

The Total Return Fund gained 0.2 percent over the past month, lagging behind 87 percent of its peers, according to data compiled by Bloomberg. It has returned 7.7 percent on average over the past five years, outperforming 68 percent of competitors, the data show.

The Newport Beach, California-based company doesn’t comment directly on monthly changes in holdings or specific types of securities within a market sector. Pimco is a unit of Munich-based insurer Allianz SE. (ALV)

Other Assets

“Other” assets in the Total Return Fund dropped to 4 percent from 5 percent, according the website. This category may include municipal debt, convertible bonds, preferred shares and foreign bonds denominated in U.S. dollars, according to the Pimco website.

Gross kept emerging-market bonds unchanged at 6 percent and held non-U.S. developed debt at 4 percent, the data show.

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

The Total Return Fund lost its rank as the world’s biggest mutual fund in October to the Vanguard Total Stock Market Index Fund.

Gross’s flagship fund had its seventh straight month of withdrawals in November as clients pulled an estimated $3.7 billion, according to Chicago-based research firm Morningstar Inc. in an emailed statement on Dec. 3. Net redemptions year through Nov. 30 are estimated at $36.9 billion, Morningstar said, on track to be the most ever for a calendar year.

Growth Forecast

The world economy will enjoy faster growth next year, as improvement in the U.S. and the euro area offsets slowdowns in China and Japan, Mohamed El-Erian, Pimco’s chief executive officer said in an interview Dec. 9.

El-Erian, who serves as co-chief investment officer with Gross, forecast that the world economy is likely to expand 2.5 percent to 3 percent in 2014, up from 2.3 percent this year. U.S. growth will accelerate from 1.8 percent, expanding by 2.25 percent to 2.75 percent.

The “Fed tapers in January, not next week,” Gross wrote in a Twitter post Dec. 8, after putting the odds of a reduction in asset purchases this month at 50 percent on Dec. 6. On that day, the Labor Department said employers added 203,000 workers in November and the jobless rate dropped to a five-year low of 7 percent The Fed meets on Dec. 17 to 18.

To contact the reporters on this story: Susanne Walker in New York at swalker33@bloomberg.net; Wes Goodman in Singapore at wgoodman@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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