Pacific Investment Management Co.’s Bill Gross, manager of the world’s biggest mutual fund, said it’s good for the firm to be in high-quality bonds and U.S. Treasuries amid rising risks in the global markets.
“It has been good for Pimco to have been high-quality oriented and to have recognized the risk in terms of low yields and low future returns,” Gross said during an interview today on Bloomberg Television’s “Market Makers” with Erik Schatzker and Sara Eisen. Stocks, high-yield debt, currency and emerging- market bonds are all in “disarray,” he said.
Gross has raised the holdings of U.S. government debt in his Pimco Total Return Fund to 39 percent as of April 30, the highest level since July 2010. Treasury yields fell yesterday by the most in almost two months after a report showed U.S. private employers added fewer jobs than forecast in May. The rally marked a reversal from last week, when 10-year yields climbed to a 14-month high as investors weighed whether the U.S. economy is strong enough to withstand a pullback of bond purchases by the Federal Reserve.
“Treasuries in the last few weeks have certainly been the place to be,” Gross said today.
Gross’s $293 billion fund suffered the first client withdrawals since 2011 in May as global bond markets tumbled the most in nine years. Clients pulled $1.3 billion from the fund, according to estimates from Morningstar Inc. in Chicago, as it declined 0.56 percent this year, trailing 52 percent of peers.
The fund is down 2.1 percent in the past month, behind 89 percent of similarly managed funds, according to data compiled by Bloomberg. Over the past five years, Gross’s fund has advanced 7.6 percent, ahead of 93 percent of rivals.
Pimco holds TIPS, or Treasury Inflation Protected Securities, because it anticipates inflation over the next three to five years, Gross said. In the shorter term, as economic growth weakens and stocks decline, inflation will continue to be contained, he said.
Gross, who is co-chief investment officer of Pacific Investment Management Co., said last month that the three-decade bull market for bonds, including Treasuries, corporate debt and mortgages, probably ended in the last week of April as yields reached a low and prices peaked. He said on May 31 that Pimco likes Treasuries that mature in five to 10 years, as there will be “no tapering for now.”
Pimco, based in Newport Beach, California, is a unit of Munich insurer Allianz SE and manages $2.04 trillion in assets.