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Joshua Anderson, Carrie E. Peterson-Brown
The term “structured credit” either frightens or excites depending on whether an investor is reflecting on the first couple years of the most recent financial crisis or looking forward in 2012. In addition to the ongoing benefit of historically low interest rates for the foreseeable future, this sector looks poised to experience positive supply and demand dynamics and should offer investors attractive risk adjusted return potential, PIMCO believes.
Many investors remain skeptical. But the market environment for structured products – from U.S. and European residential and commercial mortgage-backed securities (CMBS) to consumer asset-backed securities (ABS) and collateralized loan obligations (CLOs) – has changed markedly since the onset of the crisis nearly five years ago. The sector as a whole has undergone significant deleveraging as impaired balance sheets rapidly shed exposure.
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. 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. Mortgage and asset-backed securities may be sensitive to changes in interest rates, subject to early repayment risk, and while generally supported by a government, government-agency or private guarantor there is no assurance that the guarantor will meet its obligations. Collateralized Loan Obligations (CLOs) may involve a high degree of risk and are intended for sale to qualified investors only. Investors may lose some or all of the investment and there may be periods where no cash flow distributions are received. CLOs are exposed to risks such as credit, default, liquidity, management, volatility, interest rate, and credit risk. The credit quality of a particular security or group of securities does not ensure the stability or safety of the overall portfolio. Statements concerning financial market trends are based on current market conditions, which will fluctuate. 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.
This material contains the opinions of the author but not necessarily those of PIMCO and such opinions are subject to change without notice. This material has been distributed for informational purposes only. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. ©2012, PIMCO.
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, 650 Newport Center Drive, Newport Beach, CA 92660, 800-387-4626. ©2014, PIMCO.
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