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Portfolio Changes at Pimco

Kurt Brouwer July 20th, 2009

Bill Gross and Pimco announced some changes to the Pimco Total Return portfolio. This Bloomberg piece has the details [emphasis added]:

Pimco’s Gross Reduces Mortgage Holdings, Adds to Cash (Bloombergy, July 20, 2009, Wes Goodman and Dakin Campbell)

Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., reduced holdings of mortgage debt last month and added to cash and equivalent securities.

Gross cut the $161 billion Total Return Fund’s investment in mortgage bonds to 54 percent of assets, the lowest in almost two years, from 61 percent in May, according to a report on Pimco’s Web site. Gross trimmed holdings of government-related bonds to 24 percent of assets, the least since February, from 25 percent.

In an investment outlook published earlier this month, Gross said investors should look for “secure income” offered by bonds and dividend-paying stocks. “The outlook for risk assets — stocks, high-yield bonds, and commercial and residential real estate will involve just that — risk,” he said in the July 1 report.

Economic growth will be slower and profit margins will be narrower than in the past decade, Pimco’s co-chief investment officer wrote in the report. An index of consumer confidence declined to 47 this month from 49.3 in June, according to a Bloomberg News survey of economists before the Conference Board’s report July 28, as rising unemployment undermines optimism the U.S. recession is about to end.

…Pimco has forecast a “new normal” in the global economy that will include heightened government regulation, lower consumption and slower growth in the coming years. U.S. growth rates will slow to 2 percent or less over the next five years, according to the firm.

…Gross kept his allocation to corporate debt unchanged at 18 percent of assets.

…The Total Return Fund returned 10.9 percent in the past year, beating 97 percent of its peers, according to data compiled by Bloomberg. The one-month return is 1.2 percent, outpacing 45 percent of its competitors. Pimco, based in Newport Beach, California, is a unit of Munich-based insurer Allianz SE.