Pimco Fund Boosts U.S. Government Related Holdings

Pimco's Total Return Fund increased holdings of U.S. government-related debt and mortgage-backed securities in November as prices of Treasury bonds strengthened.

The holdings of the $162.8 billion fund, the world's largest actively managed bond fund, are being monitored by investors following the abrupt departure of longtime Total Return manager Bill Gross in late September. Clients pulled nearly $60 billion out of the fund between September and November, adding to the outflows that have been hitting the fund for more than a year.

U.S. government-related holdings accounted for 37% of the fund at the end of last month, compared with 35% at the end of October, according to data available Tuesday afternoon on Pacific Investment Management Co.'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.

Prices of U.S. government bonds rallied in November and the yield on the benchmark 10-year note fell by 0.17 percentage point to 2.169%. Yields fall as prices rise.

The fund's holdings of mortgage-backed bonds was 23%, compared to 22% at the end of October.

In contrast, holdings in developed countries other than the U.S., which include sovereign debt sold by euro-zone countries and the U.K. and Canada, fell to 6% at the end of November from 12% in October.

The fund held 46% in cash-equivalents assets, which include cash and other short-term investments, unchanged from October.

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 fund suffered $27.5 billion in net outflows in October, which followed $23.5 billion of net redemptions in September. But last month, the outflow slowed to $9.5 billion as the fund's performance improved.

The Pimco fund posted a total return--including price changes and interest payments--of 1% in November, beating 99% of its peers, according to data from Morningstar.

The fund's 4.67% return through Monday in 2014 lagged behind 5.5% return on the benchmark index--the Barclays U.S. Aggregate Bond Index and trailed 66% of its peers, according to Morningstar.

The fund maintains a solid long-term track record. Its annualized average return over the past 15 years through Monday was 6.74%, beating 96% of its peers.

Write to Min Zeng at [e-mail]

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