"Bond King" Pimco Buying Gold - 18 May 2011

THE WORLD'S LARGEST bond-investment group has begun Buying Gold for investors in its new $1.2 billion stock-market fund.

"The largest position in the fund is gold," says Anne Gudefin, co-manager of the EqS Pathfinder at Pimco, in an interview with Fortune magazine.

"We think [ Buying Gold ] is a very good form of protection against what can go wrong."

Founded (and still led) by "bond king" Bill Gross in 1971, Pimco now manages more than $1.2 trillion for investors worldwide. Earlier this year, Gross sold all US government debt from his $237bn Total Return flagship fund, repeating his warning that "America's creditworthiness is deteriorating."

"We were encouraged [to Buy Gold ] by the fact that a lot of the central banks, especially in Asia, are big buyers," Gudefin tells Fortune. "We think that's an underlying trend that's very favorable for gold."

The People's Bank of China only reports its gold buying periodically. But in the last 12 months, according to data compiled by market-development organization the World Gold Council, new reserve purchases have been confirmed by Bangladesh, Mexico, Russia and Thailand amongst others.

Besides Buying Gold for Pimco's equity fund – and working with Charles Lahr, with whom she previously ran $16 billion in funds at Mutual Global Discovery, averaging 7% annual returns – Gudefin says she is targeting consumer stocks, especially luxury goods producers expanding in China.

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