PIMCO’s Bill Gross continues to churn the holdings of a flagship fund in favor of government and government-related assets. From the Dow Jones Newsires’ Kevin Kinsbury, writing in the Wall Street Journal this morning:

Mortgage holdings tumbled last month in Pacific Investment Management Co.’s benchmark Total Return mutual fund in August, making up the smallest amount of the portfolio in more than two years, while government holdings surged.

On a market-valued weighted basis, the fund – whose assets rose $8.5 billion during the month to $177.5 billion – had 38% of its assets last month in mortgages. That is smallest amount since the same figure was logged in February 2007 and is sharply lower than July’s 47%.

The percentage got as high as 86% in February as global markets remained in turmoil. Fund manager Bill Gross loaded up on mortgage-backed securities issued by federal agencies like Fannie Mae (FNM) when they were beaten down late last year but have rebounded in 2009.

Total Return’s holdings of government and government-related assets – which include Treasurys along with their futures and options, agency debt and interest-rate swaps – soared to 44% in August from 25% in July. Government holdings haven’t held a bigger position than mortgages in the fund since December 2004 and last month’s figure was the highest since the 53% logged in August 2004.

Investment-grade corporate debt remained flat at 18%.

Source:

“Mortgage Stake Slump, Govt Issues Soar In Total Return Fund”
Kevin Kinsbury
Dow Jones Newswires (Wall Street Journal), September 16, 2009

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