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PIMCO $250 Billion Total Return Fund Rumored To Enter Stocks, Buy Up To 10% In Equities

Tyler Durden's picture




 

RanSquawk is reporting that according to "sources", PIMCO's total return fund may buy up to 10% in equity securities. We have not seen another confirmation yet on this very material development which, if true, will confirm that Bill Gross is starting to sound the retreat on rates (his deceptive de minimis purchase of $17 worth of closed-end mutual funds notwithstanding), and that PIMCO may soon become the most unique experiment in a fund transitioning from pure bonds to hybrid (or all out) equity.

Update from Street Insider:

Bill Gross' massive $250 billion PIMCO Total Return Fund  may invest up to 10 percent of assets in equity-linked securities like preferred stocks, according to a regulatory filing. The fund won't invest in common stock.

Bloomberg first reported this news.

PIMCO may start investing in these equity securities as early as the second quarter of next year.

10 percent of the massive fund would equal about $25 billion.

And the full report from Bloomberg:

Bill Gross’s Pimco Total Return
Fund, the world’s largest mutual fund, is expanding its
investment policy so it may put as much as 10 percent of assets
in equity-linked securities.

Pimco said it may start investing in preferred stock and
equity-linked bonds as early as the second quarter of next year,
according to the filing today with the U.S. Securities and
Exchange Commission. The fund won’t invest in common stock, the
Newport Beach, California-based firm said.

The $250 billion Pimco Total Return Bond Fund has advanced
7.8 percent in the past five years, beating 98 percent of
similarly managed rivals over that period, Bloomberg data show.
Gross said in October that asset purchases by the Fed will
probably signify the end of the 30-year rally in bonds.

Pimco, a unit of Munich-based insurer Allianz SE, manages
about $1.2 trillion in assets. Mark Porterfield, a spokesman for
Pimco, declined to comment on the filing.

 

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Thu, 12/16/2010 - 11:52 | 811479 Cognitive Dissonance
Cognitive Dissonance's picture

Is this the sign that the 30 year bond market rally is over?

Or that the Fed needs another big gun buying equities to keep pumping lead into the stock market pencil?

Or both?

Thu, 12/16/2010 - 12:07 | 811547 outamyeffinway
outamyeffinway's picture

Or the market not being forced to sell off due to tax breaks ending. The party goes on a little while longer?

Thu, 12/16/2010 - 12:24 | 811600 AnarchoCapitalist
AnarchoCapitalist's picture

It says that he will not be buying common stock, only preferred. PIMCO buying preferreds should not effect the stock market.

To answer your question, I would think that this would be a sign that the he sees the risk of inflation on the horizon- which is exactly what he has been saying for the past year.

Thu, 12/16/2010 - 12:36 | 811634 AccreditedEYE
AccreditedEYE's picture

"equity linked" securities can also be derivatives... jus sayin'

Thu, 12/16/2010 - 12:51 | 811670 AnarchoCapitalist
AnarchoCapitalist's picture

Good point.

I still do not think that $25 billion would have any material effect on say the NYSE which has about $12 trillion in listed companies' market capitalization. This move would seem to be an inflation hedge for the bond fund.

Thu, 12/16/2010 - 12:52 | 811667 knukles
knukles's picture

Thought that it was called and sold as a bond fund.
Who cares.

Last time this type of fun and games happened was during the dot.com bubble, when "utility" funds (them hyper-conservative dividend income thingimliebobs that are sold to widows and orphans) decided that anything vaguely sounding as if on the furthest periphery of a utility enterprise such as Ulan Bator based micro-wave sound and light carriers with no income, no assets and no employees (Ninjees) with a postal box domiciled in Suckerstan were purchased at 1,000,000 times future nonexistent earnings prospects at the end of time. 
Awesome.

And they all went fuck-ola leaving Ma and Pa Kettle and the unsuspecting life time health care trusts for 3,001 hermaphroditic midgets in Baksheesh, Afghanistan yet to be sold to tribal chieftains as gurlieboys by Halliburton, totally screwed but the mutual fund managers with a boat load of bonus money, before the crash, (BC).

Reminds me of the good old days.
(wistful sigh)

Thu, 12/16/2010 - 11:53 | 811504 AR
AR's picture

For those who know Bill well, we know that he tells the market exactly what he wants the market to believe he is doing, all while his portfolio actions are often on the opposite side of that trade. I would be suspect of information like this. As one of our large desks, who have handled a lot of their flow over the years, will confirm this (and have). The man is a lot of things, but a fool he is not. Good luck everyone.

Thu, 12/16/2010 - 11:57 | 811515 Rogerwilco
Rogerwilco's picture

If you're chasing return, you have to go where the fox is right now. One might also say "desperate people do desperate things", but everyone knows that PIMCO is run by calm, level-headed guys who would never find themselves in a bind.

/s

Thu, 12/16/2010 - 12:03 | 811534 Deflationburger...
Deflationburger with Fleas's picture

You need a lobotomy if you think that is what they are doing.

Thu, 12/16/2010 - 12:29 | 811616 jesusonline
Thu, 12/16/2010 - 11:57 | 811520 TWORIVER
TWORIVER's picture

He is waiting until then so he can pay a lot less.

Thu, 12/16/2010 - 12:19 | 811578 SheepDog-One
SheepDog-One's picture

Planning 10% buy in of stock 6 months from now? Has to mean he knows it will all be far lower by then.

Thu, 12/16/2010 - 12:42 | 811649 TWORIVER
TWORIVER's picture

;-)

And note that he can only buy preferred issues. I remember them being on serious sale not too long ago from some very important, semi nationalized institutions.

Thu, 12/16/2010 - 14:56 | 812029 NotApplicable
NotApplicable's picture

Wanna bet that Timmah is going to give Gross some sort of deal like Uncle Warren got with his 10% perpetual preferred shares of Goldman Sachs?

Six months ought to be just about enough time to negotiate these deals with all of the banks currently negotiating mortgage put-backs, like say Bank of America.

Who says that MBS is trash? Certainly not Gross, who has been buying it on margin, only to leverage into a chokehold.

Not bad work, if you can get it.

Thu, 12/16/2010 - 11:58 | 811523 john_connor
john_connor's picture

The correct move here for PIMCO would be to take 10% of Total Return and invest into their StocksPlus Short fund.  They could then hedge that with a few high dividend preferreds

Thu, 12/16/2010 - 12:31 | 811622 AccreditedEYE
AccreditedEYE's picture

If they were really negative, they would take the hit to yield and buy up corporate/sovereign CDS. They could maintain a return and reinvest as yields moved higher... I would also imagine a good chunk of money would be forced to move out of Total Return if this is true as it would go against a lot of investment policy statements.

Thu, 12/16/2010 - 12:00 | 811527 RobotTrader
RobotTrader's picture

Can't blame them. After this month's devastating losses, they have no choice but to "catch up" by chasing some beta. Gross' footprints are all over the Nasdaq today, up volume 65% vs. down volume of 35%.

Thu, 12/16/2010 - 12:06 | 811542 Deflationburger...
Deflationburger with Fleas's picture

Robo - read the damn press release.  They are NOT investing in common stock.

Thu, 12/16/2010 - 12:25 | 811607 T Rex
T Rex's picture

They're clearly shills.

Thu, 12/16/2010 - 14:33 | 811943 blindfaith
blindfaith's picture

so sayth the lord Pimco.  You learnth from an opponent who is smarter than you.  Keepth feeding your opponent the answers they need to see and hear.  Let them believeth they are smarter than you are.  Then leadth them to slaughter when they least expect it by the thing they least expect.

Since when has Mr. Bill entered the halls of worship?  He is fed the bread of Bernanke, the Judas of America.

You can not serve two masters, there is something wrong here.  Bernanke does not forgive so easy when love flies.

Thu, 12/16/2010 - 12:15 | 811556 SheepDog-One
SheepDog-One's picture

Pssst hey Robo, try reading the article....says PimpCo wont be entering bubble stock market until about 6 months from now, and its prefered shares. Big deal, last desperate acts.

Thu, 12/16/2010 - 12:39 | 811645 4xaddict
4xaddict's picture

leave Robo alone

+1 for the rack and -1 for the research RT 

Thu, 12/16/2010 - 14:36 | 811958 blindfaith
blindfaith's picture

make sure that there is meat on a bone before you buy it.

Thu, 12/16/2010 - 12:59 | 811699 QQQBall
QQQBall's picture

Bill Gross footprints are all over the NAZQUAK this morning. Hahahaha!

Thu, 12/16/2010 - 12:04 | 811535 goldmiddelfinger
goldmiddelfinger's picture

"PIMCO may start investing in these equity securities as early as the second quarter of next year."

By then one could repair all the bugs on the dreamliner and have a space station established on the moon.

Thu, 12/16/2010 - 12:08 | 811550 SheepDog-One
SheepDog-One's picture

Yea good point. 'PimpCo may buy stocks around 6 months from now. Hell by then, or even January, this whole damn thing may have gone off like a bomb.

Thu, 12/16/2010 - 12:05 | 811537 slaughterer
slaughterer's picture

C'mon Bill, buy those high-risk FnF preferreds for your "bond fund."  You can get D.C. to make FnF public again by Q2 2011, can't you?

Thu, 12/16/2010 - 12:06 | 811541 TradingJoe
TradingJoe's picture

Again he has the (first) insight! I must agree with the poster above, it might be just the opposite of what he wants to do! Chasing these big guys has never been a good strategy though, we would always be the bag holders! Watch and stay away! Thing is, lately "the market" has not done what it was supposed to by POMO so...who knows?!?!

Thu, 12/16/2010 - 12:20 | 811545 SheepDog-One
SheepDog-One's picture

This PimpCo drama is getting hillarious.

Thu, 12/16/2010 - 12:55 | 811685 knukles
knukles's picture

Fuck yeah.
Right up there with Goldman's latest, "Oh shit it changed again whatever." forecast.

Thu, 12/16/2010 - 13:07 | 811718 SheepDog-One
SheepDog-One's picture

GS changing their long term 2 year forecasts daily now from wildly bullish to flatline or worse.

Thu, 12/16/2010 - 12:09 | 811553 jesusonline
jesusonline's picture

Consistent with Gross allegedly planning to allocate his own money to muni debt.

...we know that he tells the market exactly what he wants the market to believe he is doing, all while his portfolio actions are often on the opposite side of that trade.

With that in mind, more likely it speaks about his confidence that stuff will be bailed out on and on. Municipal bonds market, whatever comes out of Europe - Spain, Portugal, etc. Kind of doubtful that they would try to pimp up the market and lure the "cash on the sidelines" into equities with such kind of news. Probably they'd rather do a flash crash on Ron Paul trying to go after Fed in Q1, or run up those CDS trades on PIIGS refinancing (March- April if i'm not mistaken)  

Thu, 12/16/2010 - 12:14 | 811569 Boilermaker
Boilermaker's picture

And....REITs start their clothesline yo-yo act immediately.  The IYR gets yank-and-cranked over and over and over.  I guess the entire US REIT markets are worth +/- 2% every 10 minutes or so.

 

Thu, 12/16/2010 - 12:16 | 811573 SheepDog-One
SheepDog-One's picture

I'd like to see that in other things, like gas, can we get price swings at the station up and down .40 cents or so every few minutes? It would be fun to watch, from a distance.

Thu, 12/16/2010 - 13:55 | 811834 Boilermaker
Boilermaker's picture

Well, I don't know about fuel and oil, but I know they are jacking the living piss out of the REITs again today.  Like most days, a 5 minute chart looks like a 45 degree ramp job at the end.

I have no idea how they pull it off, daily.  But, they sure do...over and over and over.

Thu, 12/16/2010 - 12:23 | 811598 T Rex
T Rex's picture

SHILLS

Thu, 12/16/2010 - 12:29 | 811613 walküre
walküre's picture

Preferred shares if he can get them. Good luck pal, pick a number. We all want those. Bill, you're late in the game!

Cash is toxic. Bonds are toxic.

There's a cash bubble and its gonna burst. The money is not being lend out into the market, the banks and funds are getting scared that their cash positions are loosing value every day, every night.

Get a clue folks.

Thu, 12/16/2010 - 13:08 | 811721 SheepDog-One
SheepDog-One's picture

Bill is now just another bubble chaser, hoping to get some yield somewhere. All BS.

Thu, 12/16/2010 - 14:42 | 811987 blindfaith
blindfaith's picture

a view from on high....right on!  And their real estate holdings are loosing value by the minute while their expenses are mounting.

Bonds, stocks...buy high sell low. 

Thu, 12/16/2010 - 12:32 | 811624 sbenard
sbenard's picture

$25 billion, schmillion! The Fed invests that in stocks every WEEK!

Thu, 12/16/2010 - 12:41 | 811651 4xaddict
4xaddict's picture

maybe Ben Down and Emptya Sack(s) are going on a honeymoon retreat that week so PimpCo are filling the void?

Thu, 12/16/2010 - 12:36 | 811632 papaswamp
papaswamp's picture

Markets get a boost from the Fed POMO - the central bank buys $6.78B in Treasurys, of $22.084B submitted by dealers.

 

Wow dealers are really trying to get rid of those bonds....amount offered almost doubled in 1 day.

Thu, 12/16/2010 - 12:51 | 811672 the grateful un...
the grateful unemployed's picture

so Gross will eat his own cooking ( figure out what the fed is going to do, and then do it), and buying preferred is smart, they have rights ahead of the common stock holders?

Headline on our local newspaper, Utility seeks 7.5% rate increase. I would start looking at energy preferred and utilities, which can raise dividends and have some pricing control (although you wonder what the PUC is going to say to their request, but perhaps Uncle Ben will come to the rescue?) 

Thu, 12/16/2010 - 12:58 | 811695 vote_libertaria...
vote_libertarian_party's picture

So in other words he is not hedged on the bonds?

 

Or he doesn't trust his hedge positions?

Thu, 12/16/2010 - 13:23 | 811755 pleseus
pleseus's picture

I bet you he shorts his own bond funds.

Bill, rising interest rates.  It's called repricing risk.  Default Risk.

Thu, 12/16/2010 - 13:42 | 811800 LoneCapitalist
LoneCapitalist's picture

What are the implications for fixed-income retirees? Smaller dividends?

Thu, 12/16/2010 - 13:49 | 811819 Atomizer
Atomizer's picture

November 2010

TIPS for Inflation Protection Or, How I Learned to Stop Hating Low Yields and Started to Enhance Them

http://www.pimco.com/Pages/TIPSforInflationProtection.aspx?goback=.gde_44059_member_36417820

Thu, 12/16/2010 - 13:55 | 811830 DavidRicardo
DavidRicardo's picture

Ha ha!  Just when stocks are about the collapse!!  This idiot Gross should have stuck to stamp collecting, just like that other idiot, Pete du Pont.

Thu, 12/16/2010 - 14:59 | 812041 IMA5U
IMA5U's picture

hmmm....largest bond manager in the world opts to find total return in stocks instead of bonds

 

what does that say about opportunities in credit right now....?

Thu, 12/16/2010 - 15:27 | 812122 Gringo Viejo
Gringo Viejo's picture

Yo Bill.....

You can run...but 'ya can't hide.....

"If I don't get some shelter......

Lord I'm gonna fade away......"

Thu, 12/16/2010 - 21:02 | 812968 jmc8888
jmc8888's picture

This just in, the NBA is turning into Soccer/futbol.  Now the authority on bonds will attempt to turn into the above.  Soccer it's anything but faanntastic.  Will it be...Pimco, the authority on 1 million p/e Amazon (ps) and occasionally some bonds?  

Next thing you know you'll tell me that the Squid became a bank or something.

Snickers- Hungry? Too bad eat a rice cake.

Timex- It takes a licking but is no longer ticking

Arby's - It used to be different

Heinz- 56 discarded, 1 left

Visa - It's everywhere you used to think you could afford to be

Kix - Kid Tested, Mother Approved, Accountants added sugar??

Kit-Kat - Give me a break, give me a break, break me off a piece because I can't afford that Kit-Kat bar.

Raid - Kills Bugs...sometimes?

'Think Outside the Bun...enjoy a pizza at Taco Bell'

Rolaids is spelled P-E-P-C-I-D--A-C-

Mentos - The Regular Chewing gum

Nike - Used to do it

Well if we continue on this rate one thing is for sure.  McDonald's will change too, it'll be an EXPENSIVE place to eat.  Hell, at 4 bucks a "premium?????" sandwich, it already is.

So after lining up it's core consitutency next to a place kicker and a curb, what again will Pimco be the authority on? Without expert networks mind you? Well, except The Bernank.

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