March 13, 2011

Bond king's Lear-like Treasuries renunciation

Michael Mackenzie

At the end of June, the Federal Reserve will no longer be the biggest buyer of US Treasuries. But one notable investor has already said Hasta la vista.

Pimco's flagship $237bn total return fund, managed by Bill Gross, whose status as bond king has been synonymous with the 25-year bull market in Treasury debt, pulled the plug on holding US government related securities in February, it emerged this week. Last month his fund eschewed holding US government related debt, having had 12 per cent of the fund's portfolio in Treasuries in January.

Given the record of Mr Gross, one cannot ignore the decision. Since the total return fund began in 1987, it has generated an average annual return of 8.42 per cent versus the 7.27 per cent gain in its benchmark, the Barclays Capital US Aggregate index.

The move is a bold one. Given that the Barclays Aggregate has a Treasury weighting of 40 per cent, the decision by Mr Gross to exclude government holdings means he is seriously underweight his benchmark, or "bogey".

Posted by jez at March 13, 2011 9:01 AM | Subscribe to this site via RSS:
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