One of the new wave of US fund managers that have swept into Europe in the last couple of years, Pimc...
Its investment approach is total return, investing in various debt securities including asset-backed, mortgage-backed and corporate bonds from investment grade to high yield.
Consistency is a key factor, according to director Joe McDevitt. Bill Gross, one of the founding directors in 1971, is still active as chief investment officer. Pimco also runs an enhanced equity index product and has other equity funds that are managed by Oppenheimer Capital, which Pimco acquired in 1997. There are a number of key principles that form the foundation of the group's international fixed income strategy. Firstly, they limit volatility with respect to an assigned index, controlling tracking error and correlation.
Pimco is of the belief that consistent above-index performance is best produced by using multiple sources of value added. It makes a number of small departures from the benchmark, which together should produce a tracking error of 200-300 basis points.
In addition, the process also involves separating the portfolio's bond and currency decisions. Given the number of hedging tools available, the fund's managers feel there is no real reason why the decision to buy a particular bond should include an obligation to own the currency as well.
The country bond allocation process focuses on economic and credit fundamentals as the key determinants of value in fixed income markets. Analysis of economic data, real yields and country risk serve to identify asset allocation. Finally, Pimco uses proprietary quant tools to measure and monitor risk.
The group is now putting more effort into the marketing of its Dublin umbrella. With the acquisition of Pimco by German insurer Allianz, it is sure to become a major player in the European funds market. We are extremely confident of the prospects for the Pimco GIS Global Bond fund and believe that the spread-based product will become increasingly important to the bond investor.
Lee Thomas, the manager of the fund, continues to target a duration below that of the benchmark, particularly in Japan due to high debt levels and the likely level of new issuance required to maintain the momentum in the Japanese economy.
Within Europe, the peripheral markets are favoured, with an emphasis on credit instruments in Spain and Italy and mortgage bonds in Germany and Denmark that are offering an attractive yield pick-up versus sovereign debt. The overweight position in Greece has been maintained as absolute yield levels remain high and convergence with Euroland is a clear target for the economy.
In the dollar bloc, Thomas is emphasising short dated maturities in New Zealand and Australia and mortgages in the US where the yield pick is attractive versus sovereign debt. In the UK, he favours four-year paper, as the yield curve in the UK is inverted and offers little value at the long end.
From a currency perspective, the GIS Global Bond fund is overweight the euro due to concerns over the scale of the US current account deficit and better growth prospects in Europe.
Follows McVey's resignation
Schroders and Aviva Investors
LightTower Partners, Seneca Partners and Unicorn AM
Integration with Money Dashboard
View from the front row