Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., increased holdings of Treasuries and government-related debt in December, as the fund suffered record redemptions in 2013 after the Federal Reserve said it would slow its bond purchases.
The proportion of the securities in the $237 billion Total Return Fund was 45 percent, compared with 37 percent in the previous month, based on data from the company’s website. Mortgage debt rose to 35 percent, from 34 percent in November.
U.S. credit, which includes investment-grade and high-yield securities, stayed at 10 percent. Holdings of money-market debt and cash-equivalent securities were negative 6 percent, from 5 percent in November.
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.
The Total Return fund last year lost investors 1.9 percent, the most since 1994, while falling behind 65 percent of peers. The fund had record redemptions of $41.1 billion. Fed Chairman Ben S. Bernanke indicated May 22 the central bank might reduce asset purchases during the next few meetings if economic growth accelerated.
Gross has underscored that investors should focus on shorter-maturity debt as the slow pace of U.S. inflation signals the Fed’s benchmark rate will remain at almost zero until at least 2016.
“Our positions have been held,” Gross said Jan. 10 in an interview with Tom Keene on Bloomberg Radio’s “Bloomberg Surveillance,” referring to purchases of shorter-term Treasuries.
“The most certainty in terms of current prices and future policy lies in the Fed and its forward guidance that we’ve received that they will not change the fed funds rate until after the taper is over,” he said. “In 2016, we still see a fed funds rate at close to 25 basis points.”
Treasuries lost investors 3.4 percent in 2013, the biggest drop since 2009, according to Bank of America Merrill Lynch Index data. The Standard & Poor’s 500 Index, boosted by demand driven by Fed stimulus, climbed 29 percent, beating government debt by 32 percentage points, the most since at least 1978, according to data compiled by Bank of America Merrill Lynch and Bloomberg.
The yield on the Treasury benchmark 10-year note rose to 3.05 percent on Jan. 2, the highest level since July 2011, amid speculation Fed tapering will accelerate.
Policy makers saw diminishing economic benefits from the central bank’s bond-buying program and expressed concern about risks to financial stability when they took the first step to cut the pace of purchases, a record of the Federal Open Market Committee’s Dec. 17-18 meeting showed Jan. 8.
“A majority of participants judged that the marginal efficacy of purchases was likely declining as purchases continue.” The minutes didn’t describe a set schedule for the pace of asset-purchase reductions, although “a few” officials mentioned the need for a “more deterministic path.”
Gross held emerging-market bonds at 6 percent and raised non-U.S. developed debt to 6 percent, from 4 percent in November, 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.