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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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?

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?

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.

AccreditedEYE's picture

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

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.

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. 

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)

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.

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.


TWORIVER's picture

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

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.

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.

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.

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

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.

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%.

Deflationburger with Fleas's picture

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

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.

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.

4xaddict's picture

leave Robo alone

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

blindfaith's picture

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

QQQBall's picture

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

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.

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.

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?

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?!?!

SheepDog-One's picture

This PimpCo drama is getting hillarious.

knukles's picture

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

SheepDog-One's picture

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

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)  

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.


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.

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.

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.

SheepDog-One's picture

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

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. 

sbenard's picture

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

4xaddict's picture

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

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.

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?) 

vote_libertarian_party's picture

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


Or he doesn't trust his hedge positions?

pleseus's picture

I bet you he shorts his own bond funds.

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

LoneCapitalist's picture

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

Atomizer's picture

November 2010

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


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.

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....?

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......"