Pimco Total Return Doubled 30-Year Treasuries in Quarter

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Pimco Total Return Fund, until this year the world’s largest bond fund, bought long-term U.S. government bonds in the first quarter as yields fell, and cut derivative bets tied to sovereign debt in a range of countries.

The fund more than doubled its holdings of 30-year Treasuries to $18.6 billion at the end of March from Dec. 31, according to a regulatory filing on Friday. Credit-default swaps tied to the debt of Brazil, China, Indonesia and Mexico fell to $6.7 billion, or 5.8 percent of net assets, from $11.4 billion. The fund sold all $4.8 billion of its credit swaps linked to Italy and Russia.

Michael Reid, a spokesman for Pimco, declined to comment on the fund holdings.

Pimco Total Return, which oversees $110 billion, lost its crown a month ago as the biggest bond fund after two years of client withdrawals. The firm has suffered more than $110 billion of outflows from the fund since longtime manager Bill Gross left in September for Denver-based Janus Capital Group Inc.

Now run by Scott Mather, Mark Kiesel and Mihir Worah, the fund advanced 1.2 percent this year through May 28, beating 67 percent of peers, according to data compiled by Bloomberg.

Since the end of March, 30-year bonds have lost 6 percent amid a global rout in fixed income. Pimco Total Return declined 0.4 percent in the past month trailing 81 percent of peers, according to data compiled by Bloomberg.

Gross Departs

Pimco, which oversees about $1.6 trillion, had been losing clients in Pimco Total Return prior to Gross’s departure as performance lagged behind rivals. The pace accelerated after Gross, 71, who helped found Newport Beach, California-based Pimco and served as its chief investment officer, said on Sept. 26 that he was leaving to manage an unconstrained bond fund for Janus Capital Group Inc.

Since Sept. 30, days after Gross’s departure, Pimco Total Return’s 30-year Treasury bond holdings have increased fivefold, while its Treasury Inflation Protected Securities have dropped by more than 30 percent.

In the first quarter, the portion of the Pimco Total Return fund’s assets held in inflation-protected securities rose to 17.1 percent from 15.8 percent, even as the holding declined in value. The fund’s total assets shrank to about $117 billion at the end of March from almost $142 billion the end of 2014. The assets peaked at $293 billion in April 2013.

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