What Is the PIMCO Credit Bond Strategy?
The strategy invests primarily in credit securities representing the best credit ideas at PIMCO, while working to maintain the risk characteristics of either the DEX Universe Corporate Bond Index or the DEX Long Term Corporate Bond Index. Credit securities represent diversified opportunities around the globe and include a broad spectrum of securities, such as supranational and bank loans. The strategy combines the best top-down and bottom-up ideas across PIMCO and utilizes a disciplined approach in the credit selection process, as issuer and industry decisions are designed to contribute meaningfully to the performance of the product.
The greatest strength of PIMCO’s approach is the ability of its portfoliomanagers to pursue attractive investment opportunities across all sectors ofthe bond market. By investing in many different types of bonds, the strategyaims to deliver the following potential benefits to investors:
The firm’s investment process utilizes both “top-down” and “bottom-up” strategies with the goal of combining perspectives from both the portfolio and security levels in an effort to consistently add value over time within acceptable levels of portfolio risk. Top-down strategies focus on duration, yield curve positioning, volatility and sector rotation. These strategies are driven by our secular outlook of the forces likely to influence the economy and financial markets over the next three to five years, as well as our cyclical views over a six- to 12-month time horizon.Bottom-up strategies drive our security selection process and facilitate the identification and analysis of undervalued securities. Here, we employ advanced proprietary analytics and expertise in all major fixed income sectors.
PIMCO seeks to produce a performance record of consistent above-marketreturns while maintaining an overall risk level similar to the benchmark byemploying the following strategies:Credit analysisPIMCO places a great deal of importance on independent analysis whenevaluating corporate debt issues and typically avoids reliance on creditagencies alone. Our senior portfolio managers work with a team of creditanalysts who evaluate individual issues. Each security is assigned an internalPIMCO rating.Quantitative researchDue to the complexities of the fixed income markets, PIMCO has developeda set of proprietary quantitative tools designed to assess how securitiesmight react to changes in interest rates and market conditions. We believethis gives us a distinct advantage relative to our competitors in evaluatinginvestment decisions.Cost-effective tradingAs one of the largest bond managers in the world, economies of scale allowus to focus on keeping transaction costs low. Transaction costs are factoredinto all of our analyses to help ensure the opportunity cost of each trade isoutweighed by the potential benefit.Issue selectionWe have specialists in a wide variety of fixed income sectors. These specialistsare focused on evaluating the relative value between individual securitieswithin a sector. By understanding and exploiting these differences, we seekto capture value for our clients.Avoiding extreme durationsDuration, or the price sensitivity of a bond to a change in interest rates,is extremely important in structuring a portfolio. In our effort to achieveconsistent results, we work to avoid extreme duration shifts. We believeoperating within a moderate duration range, typically between two years ofthe benchmark, increases the opportunity of achieving consistent above marketreturns while limiting the portfolio’s exposure to market swings.
No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. PIMCO is a trademark of Allianz Asset Management of America L.P. in the United States and throughout the world. PIMCO Canada Corp., 199 Bay Street, Suite 2050, Commerce Court Station, P.O. Box 363, Toronto, ON, M5L 1G2, 416-368-3350. ©2017, PIMCO.
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