By Min Zeng
Pimco's Total Return Fund cut U.S. government-related debt in
January and raised holdings of mortgage-backed securities,
corporate debt and foreign-currency bonds.
The allocation signaled the world's largest bond fund by assets
reached for higher yields last month, outside the ultrasafe U.S.
government debt market. The yield on the benchmark 10-year Treasury
note tumbled nearly half of a point last month, the biggest monthly
decline since August 2011. Yields fall as their prices rise.
The holdings of the $134.6 billion fund are being monitored by
investors following the abrupt departure of longtime Total Return
manager Bill Gross in late September. Clients pulled $11.6 billion
from the flagship fund of Pacific Investment Management Co. in
January, the 21st consecutive month of withdrawals.
U.S. government-related holdings accounted for 37.71% at the end
of January, compared with 43.19% at the end of December, and 37% at
the end of November, according to data available late Tuesday on
Pimco's website.
The Pimco fund's U.S. government-related holdings include
Treasury bonds, Treasury inflation-protected securities, Treasury
futures and derivatives linked to U.S. government debt
securities.
The fund's holdings of mortgage-backed bonds was 30.27% at the
end of January, compared with 25.43% at the end of December.
The fund held 14.01% in U.S. corporate bonds, compared with
13.56% at the end of December. The fund's emerging market holdings
were 17.94%, compared with 17.67% at the end of December.
Holdings in developed countries other than the U.S., which
include sovereign debt sold by the U.K., Canada and eurozone
countries, rose to 0.26%, compared with 0.07% at the end of
December.
Mr. Gross surprised the investing world on Sept. 26 when he
announced his departure from Pimco, which he co-founded in 1971,
following a year of heavy outflows from the Pimco flagship bond
fund and a fight with his former chief executive and heir
apparent.
The Pimco fund posted a total return--including price changes
and interest payments--of 2.64% in January, beating benchmark index
Barclays U.S. Aggregate Bond Index, which gained 2.1%, according to
data from Morningstar.
The fund posted a total return--including price changes and
interest payments--of 4.69% in 2014, trailing the 5.97% return from
the index.
The fund maintains a solid long-term track record. Its
annualized average return over the past 15 years through Monday was
6.93%, beating 96% of its peers.
Write to Min Zeng at min.zeng@wsj.com
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