(Bloomberg News) Bill Gross, who runs the world's biggest bond mutual fund at Pacific Investment Management Co., increased his holdings of Treasuries and developed-markets debt in October as Europe's sovereign debt crisis worsened.
Government and Treasury debt as a percentage of the $244 billion Total Return Fund climbed to 19 percent from 16 percent the previous month, according to data posted on Newport Beach, California-based Pimco's website today. Developed-market debt rose to 22 percent from 20 percent in September. Mortgage securities, the largest holdings, remained at 38 percent.
Pimco continues to favor sovereign debt of nations including the U.S. and U.K. where central banks are keeping interest rates low and embarking on monetary stimulus programs such as debt purchases, said Gross in a Bloomberg Radio interview Nov. 4. The firm doesn't comment directly on changes in holdings of its flagship fund.
Treasuries have returned 8.5 percent in 2011 in what would be their best year since the depths of the financial crisis in 2008, according to Bank of America Merrill Lynch indexes. The securities have gained as European leaders struggle to agree on a coordinated approach to stem the sovereign debt crisis that is now engulfing Italy.
Gross eliminated Treasuries from the portfolio in February and has increased the holdings amount since then.
The fund, which is having its worst run this year since at least 1995, regained its spot among top bond funds last month as investors returned to riskier assets. It returned 2.34 percent in the past month, beating 93 percent of rivals. It has returned 3.49 percent this year, according to data compiled by Bloomberg. The firm managed $1.34 trillion in assets as of June.
Gross, who last month told clients he hasn't lost his touch after missing the biggest quarterly rally in Treasuries since 2008, was helped by a rebound in riskier assets such as corporate credit and non-U.S. holdings.
The fund's emerging market holdings rose to 15 percent last month, from 13 percent and cut government agency debt to 1 percent from 2 percent. Cash equivalents and money-market securities fell to negative 23 percent in October from negative 19 percent. The fund can have a so-called negative position in a sector by using derivatives, futures or by shorting a security.