By Min Zeng
Pimco's Total Return Fund slashed U.S. government-related debt
in February while it increased holdings of mortgage-backed
securities and emerging-market assets.
The allocation suggested the fund joined a broad wave of selling
in U.S. government bonds in February, driven by anxiety over the
Federal Reserve potentially raising interest rates in June. The
yield on the benchmark 10-year Treasury note jumped by over 0.3
percentage point last month, the biggest on a monthly basis since
June 2013, after a sharp decline in January. Yields rise as bond
prices fall.
The holdings of the $124.7 billion fund, the world's largest by
assets, are being monitored by investors following the abrupt
departure of longtime Total Return manager Bill Gross in late
September. Clients pulled $8.6 billion from the flagship fund of
Pacific Investment Management Co. in February, the 22nd consecutive
month of withdrawals.
U.S. government-related holdings accounted for 35.29% at the end
of February, compared with 37.71% at the end of January, and 43.19%
at the end of December, according to data available late Tuesday
afternoon 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 32.86% at the
end of February, compared with 30.27% at the end of January and
25.43% at the end of December.
The fund's emerging market holdings were 18.09%, compared with
17.94% at the end of January.
In other monthly reshuffling, the fund held 13.7% in U.S.
corporate bonds, compared with 14.01% at the end of January.
Holdings in developed countries other than the U.S., which
include sovereign debt sold by eurozone countries and the U.K. and
Canada, were negative 2.7%, compared with 0.26% at the end of
January. A negative share suggests the fund held a very negative
view on these securities.
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 1% this year through Monday, compared
with the return of 0.35% on the benchmark index-the Barclays U.S.
Aggregate Bond Index, according to data from Morningstar.
The fund improved its performance this year after a lackluster
2014. Last year, the fund's return was 4.69%, trailing the 5.97%
return form the benchmark.
The fund's annualized average return over the past 15 years
through Monday was 6.8%, beating 96% of its peers.
Write to Min Zeng at min.zeng@wsj.com
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