Bill Gross, manager of the world's biggest bond fund, kept the
fund's Treasury bonds holdings unchanged in June even as the
safe-harbor market underperformed riskier instruments amid
diminished euro-zone fears.
Mr. Gross, co-chief investment officer at Pacific Investment
Management Co., maintained Treasury bonds holdings at Pimco's
flagship $263.4 billion Total Return Fund (PTTRX) at 35%, according
to data released Wednesday afternoon on the company's website.
Meanwhile, the fund's holdings of U.S. mortgage-backed
securities remained at 52% at the end of June, unchanged from
May.
The fund maintaining a whopping 87% of its value in Treasury
bonds and MBS signals Gross's continued worries over the euro
zone's sovereign-debt crisis, even though some fund managers are
repelled by the slim yields provided by the safe-haven market.
In the July investment outlook, Mr. Gross termed Treasury bonds
"cleanest of the dirty shirts," providing a place for investors to
hide out amid uncertainties over the euro zone's debt problems and
the global growth outlook.
U.S. stocks and high-yield high risk corporate bonds beat
Treasury bonds in June, but the euphoria has proved to be
short-lived. So far this month, investors flocked back to Treasury
bonds and the benchmark 10-year note's yield, which moves inversely
to its price, has tumbled to 1.507% Wednesday afternoon from above
1.6% at the end of June.
The heavy concentration in high-quality U.S. bonds also
reflected his bets that the Federal Reserve might add more stimulus
for the economy. One option, a new bond-buying program on Treasury
bonds and possibly MBS, could boost the value of the two
markets.
So far this year, Gross's strategy has boosted returns on the
fund, a strong rebound from 2011 when he was stung by ill-timed
bets wagering on a price decline in Treasury bonds.
Gross's fund has given investors a return of 6.66% this year
through Tuesday, beating 95% of comparable bond funds and
outperforming 3.2% return on the benchmark Barclays Capital U.S.
Aggregate Bond Index.
Over the past 15 years, the fund has handed investors an
annualized return of 7.37%, compared to 6.24% on the benchmark
index.
Pimco, part of Allianz SE (ALV.XE, ALIZF), is one of the world's
biggest asset-management companies, with $1.77 trillion in assets
under management.
-Write to Min Zeng at min.zeng@dowjones.com