The Pimco Total Return Fund, the world's largest bond fund, significantly increased its holdings of U.S. government-related debt in December even as continued selling pressure on the bonds contributed to the fund's biggest annual loss in nearly two decades, data from the firm's website showed on Friday.
The fund, which has $237 billion in assets and is managed by Pimco co-founder and co-chief investment officer Bill Gross, showed an increase in holdings of U.S. government-related securities to 45 percent in December from 37 percent in November.
Pimco said on its website that its holdings of U.S. government-related securities may include nominal and inflation-protected Treasuries, Treasury futures and options, and interest rate swaps.
That marked the fund's biggest exposure to the securities since at least June of last year, when the firm introduced the category of "U.S. government-related debt" on its website.
The fund's asset allocation is important because Pimco manages roughly $1.97 trillion and is one of the world's largest bond managers. The Newport Beach, California-based Pacific Investment Management Co is a unit of European financial services company Allianz SE.
The fund also posted an increase in its mortgage holdings to 35 percent in December from 34 percent in November, maintaining the securities as its second-largest holding.
The fund showed a negative position of 6 percent in money market and net cash equivalents in December after showing a 5 percent exposure in November. The firm defines money market and net cash equivalents as liquid investment grade securities with duration less than one year.
In having a so-called negative position in cash equivalents and money-market securities, it is an indication of using derivatives and short-term securities as collateral in order to boost the fund's buying power with leverage.
The fund also increased its holdings of non-U.S. developed market securities to 6 percent in December from 4 percent in November, marking the largest exposure to the securities since May of last year.
Gross's fund fell about 1 percent in December, beating just 5 percent of peers for the month, according to Morningstar. The fund fell 1.9 percent last year, marking its biggest annual decline since 1994 and its first annual loss since 1999, Morningstar data showed.