The Pimco Total Return Fund, overseen by Bill Gross, reduced its holdings of U.S. government-related securities in August for a third straight month, to 41 percent from 45 percent in July, Pimco's website said on Wednesday.
More notable though was Gross's shift in the Pimco Total Return Fund's exposure to cash equivalents and money market securities, which showed a negative 1 percent cash position in August, compared with negative 8 percent in July and negative 11 percent in June.
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.
"The yield curve has flattened substantially this year, and it looks like Pimco took some government exposure off during August," said David Schawel, vice president and fixed-income portfolio manager of Square 1 Financial. "They probably viewed the flatter curve as a less appealing environment to leverage government bonds versus earlier this year."
Pimco's U.S. government-related category may include nominal and inflation-protected Treasurys, Treasury futures and options, agencies, FDIC-guaranteed and government-guaranteed corporate securities, and interest rate swaps.
The Pimco Total Return Fund, with assets of about $222 billion, left its mortgage holdings in August at 20 percent, but down from 22 percent in June, according to the Newport Beach, Calif. firm's website.
Meanwhile, the Pimco Total Return Fund's U.S. credit holdings were increased slightly to 13 percent in August from 12 percent the previous month, Pimco added.
The Pimco Total Return Fund had 13 percent of its assets in non-U.S. developed markets in August, down significantly from 17 percent the previous month, while the fund had 9 percent in emerging markets, unchanged from the previous month.
The Pimco Total Return Fund also had 5 percent exposure in the "other" category, which may include municipals, convertibles, preferreds, and yankee bonds, Pimco said.
Investors pulled cash from the Pimco Total Return Fund for a 16th straight month in August despite some improvement in performance for the world's largest bond fund.
The fund had net outflows of $3.9 billion in August, which brings the Total Return Fund's net cash withdrawals to almost $70 billion since May 2013, Morningstar said last week.
It had $221.6 billion in assets at the end of last month, down from a peak of $292.9 billion in April 2013.
The continuation of the fund's record outflow streak came as it posted a positive 1.11 percent return in August, surpassing 77 percent of its peers, according to Morningstar. That said, the fund is up 4.31 percent for the year as of Friday and trails 73 percent of its peers.
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