From Pragmatic Capitalism:
536 out of 584. That is the one-year ranking of PIMCO's Total Return Bond fund as of 9/30/2011 versus other funds in their Lipper intermediate grade fund group. To put this in numbers, PIMCO is up 1.9% YTD versus the category average of 5.9%, all this during the biggest bond rally in history. What is the most famed bond manager to do in light of this performance?
This afternoon's news out of Newport Beach was nothing short of astounding: PIMCO raising effective duration of their $200-plus billion Total Return Fund up to 7.14...
How did they accomplish this?
... I would venture to guess that PIMCO swapped out shorter-term Treasurys and IG credits for longer maturities. Adding 30-yearish bullets such as these would have the most impact of adding duration. Treasurys and IG credits are among the most liquid bonds, hence they'd be able to trade in enough size to affect a portfolio this large.
Did Gross and Co. front run the Fed? Doesn't seem like it. One-month return for PTTRX is -0.57% versus a positive 1.46% for the Barclays index. In fact, given the recent backup in the 10-year (from 1.75%-2.15%), one could argue that PIMCO loaded up the boat with long bonds at a potential...
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