DOW JONES NEWSWIRES 
 

Mortgage holdings made up the smallest percentage of Pacific Investment Management Co.'s benchmark Total Return mutual fund in May in nearly a year.

On a market-valued weighted basis, the $156.9 billion fund had 61% of its assets last month in mortgages, the same level as last June. The percentage got as high as 86% in February as global markets remained in turmoil. Fund manager Bill Gross loaded up on mortgage-backed securities issued by federal agencies like Fannie Mae (FNM) when they were beaten down late last year but have rebounded in 2009.

On Feb. 24, fund manager Bill Gross wrote in his monthly letter that investors should focus on areas which were to get government support in the credit markets, such as agency mortgages. The Federal Reserve has pledged buying up to $1.75 trillion in mortgage-related debt to help free up the markets.

Pimco is expected to be one of a handful of firms who will manage the U.S. government's public-private investment program, meant to help banks get rid of their toxic debt.

Meanwhile, Total Return's holdings of government and government-related assets - which include Tresuries along with their futures and options, agency debt and interest-rate swaps - dipped to 25% in May from 26% a month earlier. Investment-grade corporate debt rose to 18% from 16%.

Through May 31 the fund was up 5.56%, strongly outperforming its benchmark, the Barclays Capital U.S. Aggregate Index. The fund rose 4.8% last year, beating some 90% of its peers.

-By Kevin Kingsbury, Dow Jones Newswires; 201-938-2136; kevin.kingsbury@dowjones.com