PIMCO’s Gross Reduces Government Debt Holdings, Moves to Cash

(December 23, 2009) – Bill Gross’s Pacific investment Management Co. (PIMCO), a weathervane for many institutional investors, reportedly has raised its cash holdings to the highest levels since September 2008.

According to a report from Bloomberg, PIMCO’s Total Return Fund now is holding 7% of its nearly $200 billion in cash in November, up from negative 7% in the preceding month. In tandem with this move, the fund has lowered its exposure to sovereign debt to 51%—a seemingly prescient move given the late-November near-default by Dubai. In October, this figure stood at 63%, a five-year high.

As Bloomberg believes, through a survey of major banks and securities companies, PIMCO is making this move as the American Federal Reserve looks to raise interest rates in the coming year.

Gross often is watched by institutional investors for his historically prescient moves. The Total Return Fund has gained 17% in the past year, which puts it in the top half of its peers.