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 Gross's Pimco Total Return Fund, with $223 billion in assets, had a
still-high 45 percent of its assets in U.S. government-related
holdings in July, down from 47 percent the previous month, according
to Pimco's website on Monday.
But notable is Gross's move to decrease the Pimco Total Return
fund's cash equivalents and money market securities, which showed
negative 8 percent cash position in July, compared with negative 11
percent in June.
Having a so-called negative position in cash equivalents and
money-market securities is an indication of using derivatives and
short-term securities as collateral to boost the fund's buying
power.
At the moment, Gross's action does not look risky with interest
rates remaining at stubbornly low levels as Federal Reserve
officials in June indicated they are in no hurry to raise the
central bank's benchmark short-term interest rate.
"The shifts in the Pimco Total Return Fund looks pretty benign. Bill
Gross took down leverage a bit through mortgages and Treasuries,
which is slightly less bond bullish at the margin," said David
Schawel, vice president and portfolio manager of Square 1 Financial.
Pimco's U.S. government-related category may include nominal and
inflation-protected Treasuries, Treasury futures and options,
agencies, FDIC-guaranteed and government-guaranteed corporate
securities, and interest rate swaps.
The Pimco Total Return Fund also reduced its mortgage holdings in
July to 20 percent, down from 22 percent in June, Pimco added.
The Pimco Total Return Fund had 17 percent of its assets in non-U.S.
developed markets, up from 16 percent the previous month, while the
fund had 9 percent in emerging markets, unchanged from the previous
month.
Investors pulled cash from the Pimco Total Return Fund for a 15th
straight month in July, although outflows were substantially smaller
than previous months.
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The fund had net outflows of $830 million in July, the first time
its monthly outflow was less than $1 billion since the net cash
withdrawals started more than a year ago, Morningstar said.
The fund has had about $65 billion in outflows since May 2013, the
data showed. It had $223 billion in assets at the end of last month,
down from a peak of $292.9 billion in April 2013.
The continuation of the fund's record outflow streak came as it
posted a negative 0.52 percent return in July, lagging 90 percent of
its peers, according to Morningstar. The fund is up 3.16 percent for
the year as of Friday and trails 77 percent of its peers.
"The performance was not good in July, but it is up 70 basis points
in August," Schawel said. "They are heavily tied to the front end,
which has done great since the payroll report a few weeks ago."
(Reporting by Jennifer Ablan. Editing by Andre Grenon)
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