(Bloomberg News) Bill Gross, who runs the world's biggest bond fund, cut his holdings of emerging-market debt to a two-year low, selling assets from an area where the International Monetary Fund says growth will slow.
Gross reduced the securities to 7 percent of assets in Pacific Investment Management Co.'s Total Return Fund in April from 10 percent in March, according to Newport Beach, California-based Pimco's website. He trimmed investment-grade bonds to 13 percent from 14 percent. Treasuries were 31 percent of holdings, versus 32 percent in March, the report showed.
Growth in emerging economies will slow to 5.7 percent in 2012 from 6.2 percent in 2011, the IMF said in April. Tumbling Treasury yields have led investors to look for more attractive rates, spurring a 9 percent gain this year for a Bank of America Merrill Lynch index of emerging-market sovereign and company bonds. The Federal Reserve needs to do more to stimulate the economy to preserve the rally in "risk" assets, Gross said.
"Risk markets need more ammo if they are to stay up," Gross wrote in a message on Twitter May 8.
Treasuries have returned 0.6 percent this year, according to Bank of America Merrill Lynch data show.
Gross kept mortgage securities as his biggest holding at 53 percent of assets, according to the report posted yesterday on the Pimco website. The Federal Reserve bank will probably shift its focus to mortgage securities in its next round of purchases to keep borrowing rates low, he said in March.
Gross increased the $258.7 billion Total Return Fund's net cash-and-equivalent position to negative 18 percent from negative 23 percent. The fund can have a so-called negative position by using derivatives, futures or by shorting.
Prospects for additional Fed asset purchases increased after a Labor Department report May 4 showed U.S. employers added 115,000 jobs in April, the least in six months.
Europe's fiscal crisis is threatening to slow global growth. As Greece faces political paralysis following an election, 57 percent of the 1,253 investors, analysts and traders in a poll of Bloomberg subscribers said at least one country will abandon the euro by year-end.