In anticipation of the Federal Reserve’s eventual interest rate hikes next year, Bill Gross has reduced holdings of U.S. government-related debt in his Total Return flagship fund and related actively managed exchange traded fund.
PIMCO has cut its allocation to U.S. government related debt in its Total Return Fund (PTTRX) to 45% in July, compared to 47% in June and 50% in May, reports Susanne Walker for Bloomberg.
The PIMCO Total Return ETF (NYSEArca: BOND), an actively managed ETF version of PTTRX, reveals a significantly lower position, with a 16% allocation toward U.S. government-related debt. [SEC Allows PIMCO to Trade Derviatives in BOND ETF]
U.S. Treasuries have been one of the better performing fixed-income assets this year as yields on benchmark 10-year notes fell from around 3.0% at the start of the year. For instance, the iShares 7-10 Year Treasury Bond ETF (NYSEArca: IEF) is up 6.2% year-to-date. [Use Income Generating ETFs in a Low Growth Economy]
Gross, though, has been betting on short-term Treasuries, which have underperformed long-term debt this year. PTTRX shows a 6.21 year effective duration while BOND has a 5.43 year duration.
So far this year, BOND has outperformed its mutual fund counterpart, rising 4.6%, compared to PTTRX’s 3.9% gain.