NEW YORK Dec 10 The Pimco Total Return Fund, the world's largest bond fund, kept its exposure to U.S. government debt unchanged in November even as worries over the Federal Reserve's plans for cutting its stimulus hurt Treasury prices, data from the firm's website showed on Tuesday.
The fund, which has $244 billion in assets and is run by Pimco co-founder and co-chief investment officer Bill Gross, maintained its largest exposure to U.S. government-related debt at 37 percent in November and its exposure to mortgages at 34 percent.
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.
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 delivered a flat performance in November, down from gains over the previous two months but still beating 87 percent of peers for the month, Morningstar data show.
Gross' flagship fund averted a negative performance in November despite uncertainty surrounding the Fed's plans for unwinding its $85 billion in monthly bond-buying, which hit bond prices.
The yield on the benchmark 10-year U.S. Treasury note rose 20 basis points to 2.74 percent over the month on the concerns. The Barclays U.S. Treasury index fell 0.33 percent over the month, marking its first negative return in three months.
The fund trimmed its exposure to "other" forms of credit, meanwhile, to 4 percent in November from 5 percent in October. The firm said that "other" forms of credit may include municipal bonds, convertible bonds, preferreds and Yankee bonds.
The fund also increased its exposure to money market and net cash equivalents to 5 percent from 4 percent in October. Pimco defines money market and net cash equivalents as liquid investment-grade securities with durations of less than one year.
The fund kept unchanged its holdings of U.S. credit at 10 percent, non-U.S. developed market securities at 4 percent, and emerging markets securities at 6 percent.
The fund is down 1.39 percent for the year, beating 53 percent of peers, data from the Chicago-based Morningstar show. Over the past 10 years, the fund has earned an annualized return of 6.18 percent, a performance that has topped 96 percent of peers, according to Morningstar data.
Investors pulled $3.7 billion out of the Pimco Total Return Fund in November, marking its seventh straight month of outflows despite its solid turnout for the month compared with peers, according to Morningstar data. Investors have pulled $36.9 billion from the fund this year, Morningstar data show.
In his December letter to investors, Gross reiterated that investors should seek shorter-dated securities, including Treasuries, corporate bonds and mortgages, on the likelihood that the Fed will keep the key federal funds rate between zero and 0.25 percent until at least 2016.
The central bank has kept that rate near zero since late 2008 to help the economy recover from recession and has promised to keep it there for a while longer, probably until 2015.