Bill Gross buys junk for $288bn bond fund

PIMCO’s Bill Gross has added to the high yield credit holdings in his $288 billion PIMCO GIS Total Return fund shortly after seemingly urging investors to be more cautious in this area.

In the February update for his giant bond fund, it emerged high yield was the only bond class to see any increase, which rose from 2% to 3% over the course of the month.

At the end of last month, Gross, in an investor note on concerns about ‘irrational exuberance’, had appeared to insist investors to not pin too much hope on high yield bonds.

Although, Gross did state there was a role for them in a balanced portfolio.

This marks a return to high yield credit for Gross who had held 3% of the fund in these assets towards the end of last year but had opted to trim this at the start of 2013.

In his market commentary, Gross did not comment on the addition to high yield but did qualify it as a ‘moderate position’ within the fund.

Elsewhere among his most recent changes, Gross reduced his position in US government bonds, which dropped from 30% of the fund in January to 28% one month later.

He had been steadily building his position in US Treasuries since the end of November 2012.

In addition, the well-respected bond manager also opted to make a minor adjustment to his holdings in mortgage-backed securities, which fell from 37% to 36% of the fund.

On this topic, Gross did offer a wider commentary, he said: ‘PIMCO now views agency mortgages as fully priced due to on-going central bank interventions and will look to reduce exposure to benchmark neutral.’