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Jerome M. Schneider
Short-term investors continue to contend with a bevy of challenging headlines. While many investors, as well as regulators and policymakers, have griped about the market, actions have been few. In fact, many participants are being ambivalent, as if they were playing the match for a tie.
With the confluence of potential events coming to a crescendo over the next few months, we believe that there is a definitive advantage to those investors who act promptly and decisively to address these modifications to the rules of the game. We consider a two-tier approach which combines determining immediate cash liquidity needs and investing those funds in readily redeemable assets with liquidity and quality such as T-bills or repurchase agreements. The remaining funds destined for intermediate uses can be invested in assets that capture liquidity premiums that avoid the narrow corral of money-market eligible assets.
Past performance is not a guarantee or a reliable indicator of future results. Investing in the bond market is subject to certain risks including market, interest-rate, issuer, credit, and inflation risk. Money Markets are not insured or guaranteed by the FDIC or any other government agency and although they seek to preserve the value of your investment at $1.00 per share, it is possible to lose money. Sovereign securities are generally backed by the issuing government, obligations of U.S. Government agencies and authorities are supported by varying degrees but are generally not backed by the full faith of the U.S. Government; portfolios that invest in such securities are not guaranteed and will fluctuate in value. Investing in foreign denominated and/or domiciled securities may involve heightened risk due to currency fluctuations, and economic and political risks, which may be enhanced in emerging markets. A "risk free" asset refers to an asset which in theory has a certain future return. U.S. Treasuries are typically perceived to be the "risk free" asset because they are backed by the U.S. government. All investments contain risk and may lose value. There is no guarantee that these investment strategies will work under all market conditions or are suitable for all investors and each investor should evaluate their ability to invest long-term, especially during periods of downturn in the market.
No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. Pacific Investment Management Company LLC, 840 Newport Center Drive, Newport Beach, CA 92660, 800-387-4626. ©2014, PIMCO.
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