Gross Reduces Treasury Holdings in February From Six-Month High

Bill Gross cut the holdings of Treasuries held in his $288 billion flagship fund at Pacific Investment Management Co. to 28 percent of assets in February, after reaching a six-month high in January.

Gross reduced the proportion of U.S. government securities in Pimco’s Total Return Fund from 30 percent in January, according to a report on the company’s website. Gross has been advising investors to avoid long-term Treasuries in favor of U.S. five-year notes and inflation-indexed debt as central banks provide unprecedented stimulus.

The world’s biggest manager of bond funds cut mortgage holdings to 36 percent, the lowest level since August 2011, from 37 percent in January. It’s still the fund’s biggest holding. The Total Return Fund held 42 percent in December. Newport Beach, California-based Pimco doesn’t comment directly on monthly changes in its portfolio holdings.

The fund cut its holdings of non-U.S. developed nations’ debt to 11 percent last month, from 12 percent in January.

Investment-grade credit holdings remained steady at 9 percent last month, maintaining the lowest level since November 2007.

Gross, founder and co-chief investment officer of Pimco, wrote Feb. 27 in his monthly investment outlook that “corporate credit and high-yield bonds are somewhat exuberantly and irrationally priced” after years of record-low benchmark interest rates from the Federal Reserve.

Real Growth

The U.S. economy has to have real growth of 3 percent to justify the current market enthusiasm, Gross said during an interview on Bloomberg Television’s “Market Makers” on March 5 with Erik Schatzker and Stephanie Ruhle. The nation’s gross domestic product will increase 1.8 percent in 2013, according to the median forecast of economists in a Bloomberg News survey.

“Get us up to 3 percent in the second half of this year,” Gross said, adding that the enthusiasm graded on the degree of irrationality was about a “six-plus or seven-minus” on a scale of one to 10.

Gross kept the fund’s emerging-market debt unchanged at 7 percent in February for the third straight month.

The Mexican peso and the Brazilian real “stand out as strong currencies,” Gross said March 5 during the Bloomberg Television interview.

Gross kept the Total Return Fund’s municipal-bonds holding at 5 percent in February for the seventh straight month, while high-yield debt was raised to 3 percent, from 2 percent. He raised the Total Return Fund’s net cash-and-equivalent position to negative 1 percent last month, from negative 4 percent in January.

Fund Return

The fund returned 7.23 percent over the past year, beating 93 percent of its peers, according to data compiled by Bloomberg as of March 8.

It gained 10.4 percent in 2012, beating 95 percent of its peers, according to data compiled by Bloomberg. Treasuries returned 2.2 percent last year, according to Bank of America Merrill Lynch indexes.

The Total Return Fund’s government and Treasury debt category includes fund holdings of U.S. Treasury notes, bonds, futures and inflation-protected securities.

Pimco, a unit of the Munich-based insurer Allianz SE, managed $2 trillion in assets as of Dec. 31.

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