Pimco Cuts Holdings of Treasuries in Total Return Fund

Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., reduced his holdings of Treasuries in July.

Gross cut the proportion of U.S. government and Treasury debt in his $263 billion Total Return Fund to 33 percent of assets last month from 35 percent in July, according to a report on the Newport Beach, California-based company’s website. Mortgages were at 51 percent, from 52 percent the previous month. Pimco doesn’t comment directly on monthly changes in its portfolio holdings.

Gross’s Total Return Fund attracted $2.1 billion last month and deposits into his exchange-traded fund, which mimics the flagship’s strategy, reached the highest since the ETF started. The seventh straight month of net deposits into the mutual fund contributed to $8 billion in new cash for the year through July 31, Chicago-based Morningstar Inc. (MORN) said Aug. 1.

Treasuries returned 1.9 percent this year as of Aug. 9, while mortgages returned 2.4 percent, according to Bank of America Merrill Lynch indexes.

In developed nations, Gross has advised investors to favor debt of the U.K., as well as the U.S., as Germany faces risks related to the eventual costs required to end the region’s worsening sovereign-debt and banking crisis.

Photographer: Tim Boyle/Bloomberg

Bill Gross, fund manager at Pacific Investment Management Co.. Close

Bill Gross, fund manager at Pacific Investment Management Co..

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Photographer: Tim Boyle/Bloomberg

Bill Gross, fund manager at Pacific Investment Management Co..

Non-U.S. Holdings

The Total Return Fund raised its holdings of non-U.S. developed nations’ debt to 6 percent in July from 5 percent in June, the lowest since February 2011. Gross left emerging-market debt at 8 percent. He retained investment-grade credit at 13 percent, the smallest level since March 2008, for a fourth- consecutive month. High-yield debt fell to 2 percent from 3 percent of holdings in June.

Gross raised the Total Return Fund (PTTRX)’s net cash-and- equivalent position to negative 18 percent from negative 21 percent the previous month. The fund can have a so-called negative position by using derivatives, futures or by shorting.

Pimco’s Total Return Fund gained 7.9 percent over the past year, beating 92 percent of its peers, according to data compiled by Bloomberg.

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

Derivatives are financial obligations whose value is derived from an underlying asset such as debt, stocks or commodities. Futures are agreements to buy or sell assets at a later specific price and date.

Shorting is borrowing and selling an asset in anticipation of making a profit by buying it back after its price has fallen.

Pimco, a unit of the Munich-based insurer Allianz SE (ALV), managed $1.82 trillion of assets as of June 30.

To contact the reporter on this story: Susanne Walker in New York at swalker33@bloomberg.net

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

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