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Pimco Total Return Fund Cuts Treasury Holdings in May

Tuesday, 11 Jun 2013 | 11:06 PM ET
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PIMCO Total Return Fund, the world's largest bond fund, decreased its holdings of U.S. Treasurys in May by 2 percentage points to 37 percent, data from the firm's website showed on Tuesday.

The fund, which has roughly $285.2 billion in assets and is run by Bill Gross, had previously increased those Treasury holdings in April to 39 percent from 33 percent the previous month.

In his May investment letter to clients, Gross said that Treasurys "are better than the alternative (cash) as long as central banks and dollar reserve countries (China, Japan) continue to participate."

(Read More: (Read More: Pimco Total Return Fund's Treasury Holdings Jump to 39%)

Pacific Investment Management Co, a unit of European financial services company Allianz SE, had $2.04 trillion in assets under management at the end of March, according to the firm's website.

The fund also showed a decrease in its holdings of investment-grade credit to 6 percent in May from 7 percent and cut its holdings of debt issued in developed markets outside the United States to 7 percent from 10 percent.

The fund, which is the flagship of Newport Beach, California-based PIMCO, slightly decreased its holdings of emerging market securities to 7 percent in May from 8 percent in April. It also showed a decrease in municipal holdings to 4 percent in May from 5 percent.

PIMCO said on its website that the fund's holdings of U.S. Treasury debt includes Treasury notes, bonds, futures and inflation-protected securities.

The fund suffered its first outflows last month since December of 2011, according to Morningstar. Investors pulled $1.3 billion from the fund in May as its performance fell 2.15 percent, Morningstar said. The fund is down 1.25 percent so far this year, PIMCO's website showed.

Gross: Fed's Overdoing It
Bill Gross, PIMCO, says the Fed's policies are part of the problem and not the solution. He says rates are so low you reduce the incentive among investors to take risk.

The PIMCO Total Return ETF, an exchange-traded fund with about $5.1 billion in assets, also saw its first outflows in May since its launch in February of 2012, according to Morningstar. Investors pulled $107.8 million from the ETF.

Gross has criticized the Federal Reserve's quantitative easing in his monthly letters to investors, saying that the central bank's monthly purchases of $85 billion in Treasurys and agency mortgage securities hurt savers and business models.

(Read More: Pimco's Gross Skewers Bernanke: You're Part of the Problem)

He has also said that the measures, which the Fed is implementing to try to spur hiring and lower long-term borrowing costs, is weakening the value of investments.

In his June investment outlook, Gross characterized global stimulus measures as "New Age chemotherapy" that are becoming more of a problem than a solution.

He said the global economy requires structural, rather than monetary, reforms.

PIMCO Total Return Fund's cash equivalents and money-market securities moved from a negative 8 percent in April to 0 percent in May, the website said.

Having a so-called negative position in cash equivalents and money-market securities is an indication of using derivatives and short-term securities as collateral to boost the fund's buying power with leverage.

The fund's holdings of mortgage securities, high-yield "junk" bonds, government-guaranteed agency securities, U.S. dollar-denominated interest rate swaps and rate-related derivatives, and "other" forms of credit were unchanged in May.

(Read More: Pimco Piles On; Taper Tuesday; Bizarro World)

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