The PIMCO Total Return Fund is expanding its policy to allow investments in equity-linked securities for the first time since 2003.
PIMCO Total Return, with $250 billion in assets, may put as much as 10% of assets in securities including preferred stock and convertible bonds as early as the second quarter of next year, according to a filing Thursday with the SEC. The fund won’t invest in common stock, according to Pacific Investment Management Co.
PIMCO co-CIO Bill Gross, who said in October that asset purchases by the Fed will probably signify the end of the 30-year rally in bonds, has invested the Total Return fund in a mix of government-related debt, mortgage securities and emerging markets bonds. A top performer over the past five years, the fund trailed most of its large rivals during a debt selloff in the past month.
PIMCO said in the filing that the move to invest in equity-related securities came after the fund’s board decided to repurchase shares owned by Japanese investors and end selling the fund there. PIMCO Total Return stopped making equity-related investments in 2003 as Japanese securities law restricts such purchases for bond funds.
Mark Porterfield, a spokesman for PIMCO, declined to comment on the filing.