Pimco Total Return ETF Cuts Canada Bond Holdings

Pacific Investment Management Co.’s Total Return ETF slashed its holdings of Canadian debt to 2.1 percent from 9.2 percent in the five days ending yesterday, according to data compiled by Bloomberg.

The $3 billion exchange-traded fund, which follows a similar investment strategy as Newport Beach, California-based Pimco’s flagship $222 billion mutual fund, was run by co-founder Bill Gross before his sudden departure on Sept. 26.

Pimco has less invested in Canada than benchmarks recommend, said Ed Devlin, who oversees $17 billion, including the Canadian portfolios, for Pimco. He said he prefers markets such as Mexico.

“We still think Canada is a relatively unattractive market when we look at rates around the world,” Devlin said at the Bloomberg Canadian Fixed-Income Conference in New York yesterday. “Other markets are much more attractive.”

Devlin noted the yield on the Canadian 10-year bond, at about 2.1 percent, is in line with inflation. “What’s fun about that? Not much,” he said.

Gross had overseen the exchange-traded fund since its March 2012 inception. Investors pulled about $98 million from the ETF, according to data available on Pimco’s website. That followed a record $446.5 million withdrawal the day Gross left the firm that he co-founded to join Janus Capital Group Inc.

Mexican assets in the ETF increased to 1.1 percent yesterday from 0.9 percent on Sept. 25, according to Bloomberg data.

Pimco’s ETF also sold C$225 million ($201.6 million) of bonds issued by Ontario, according to data on the manager’s website. It was the fund’s largest holding as of Sept. 25.

Devlin didn’t respond to calls and emails today seeking comment. Pimco spokesman Mark Porterfield declined to comment on the reduction in Canadian holdings.

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