PIMCO Global Bond
PIMCO
Investment Style: Global Credit, Diversified
Pacific Investment Management Company (PIMCO) was established in 1971 as a subsidiary of Pacific Mutual Life Insurance Company, headquartered in Newport Beach, California.
German financial services company Allianz purchased a 70.0 percent stake in PIMCO in May 2000, Pacific Life and some senior PIMCO staff retaining the remaining interest. Allianz is repurchasing these equity interests over time, and owned 98.0 percent of PIMCO at 31 December 2008, although operates PIMCO as an autonomous subsidiary. PIMCO is one of the largest fixed income fund managers in the world with US$747.0 billion assets at 31 December 2008, mostly in fixed income or fixed income-based strategies, and approximately US$71.0 billion in global bond strategies.
PIMCO's bonds philosophy revolves around the principle of diversification. PIMCO believes that no single risk should dominate returns. By diversifying strategies, or relying on multiple sources of value, PIMCO is confident that it will be able to generate a solid track record with a high degree of consistency.
PIMCO seeks to add value through combining top-down secular and cyclical analysis with bottom-up fundamental and quantitative research, with considerable emphasis on its longer-term secular analysis, as it believes this affords the greatest opportunity to add value given the overall market’s preoccupation with shorter-term movements. Alpha sources include country selection, duration, yield curve, currency, sector selection, credit analysis (both sovereign and corporate issuers), as well as market volatility strategies (via the options market).
For Barclays Capital Global Aggregate-benchmarked portfolios, the investment process comprises four main steps: research, investment decisions, security selection, and portfolio construction.
The top-down research process begins with an annual secular forum designed to identify/anticipate structural change. PIMCO focuses on longer-term (three- to five-year) trends, believing that such secular considerations as demographics, political factors, and structural changes in the domestic and international economies exert powerful, sustained influences on bond markets. A secular outlook updated annually determines a general maturity/duration range for the portfolio in relation to the market.
The next step is a cyclical (quarterly) forum designed to evaluate growth and inflation over the business cycle horizon of the next six to nine months. These shorter-term, cyclical economic considerations determine shifts within this range. The final output of the quarterly forums is a range of global benchmark positions for duration, country, currency, yield curve, volatility, and sector, set by the Investment Committee.
PIMCO’s global credit research team develops proprietary credit opinion on every holding. Analysts cover industry sectors across both investment-grade and high-yield credit. Analysts identify and prioritise by relevance the four to five factors that determine the success of an investment. Key factors PIMCO analyses are typically the business model, cashflow, balance sheet, and debt structure.