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What is Diversified Income?Diversified Income is a multi-sector strategy that invests across a broad spectrum of credit market sectors including global corporate credit both investment grade and high yield, and emerging market debt. The allocation among each of these markets will vary based on PIMCO’s assessment of global trends and relative valuations. This active and dynamic approach allows for increased responsiveness in asset allocation to changing economic and market conditions while remaining anchored by PIMCO’s investment process and longer-term orientation. The ability to invest globally helps to improve diversification and may allow investors to benefit from differences in business cycles across regions and credit quality trends across credit sectors.
Global fixed income markets provide a rich opportunity set to an experienced manager capable of identifying and implementing both top-down and bottom-up investment strategies. PIMCO is a market leader in global credit markets and has over 39 years of experience in making asset allocation decisions across numerous multi-sector bond products including Total Return Strategy.
PIMCO’s Top-Down Investment Process Anchors Relative Value Assessment
PIMCO’s proven investment process takes a disciplined approach to evaluating global macroeconomic developments and prospective trends in interest rates and relative sector performance. This exercise is anchored by PIMCO’s secular and cyclical forum process, where the firm’s investment professionals from around the globe come together to develop a medium- to long-term outlook for the global economy. This process provides the framework for the regional and sector analyses that are integral to the investment decisions within the Diversified Income strategy, and that are executed by specialists based on comprehensive bottom-up analysis.
Sector Specialist Structure Generates Value Added Through Bottom-up Strategies
PIMCO’s generalist/specialist structure is uniquely positioned to take advantage of the broad set of investment opportunities within global credit markets. Generalist portfolio managers are responsible for the top-down asset allocation decisions, consistent with the themes identified through PIMCO’s forum process. Investment grade, high yield and emerging markets specialist portfolio managers are responsible for designing the bottom-up investment strategies. The specialist teams from each global office identify the optimal means of gaining exposure within their sectors and are responsible for efficient local execution.
The Diversified Income strategy is designed for investors who desire a fixed income alternative with the potential for a superior yield over core bond strategies, and that may benefit from improving global economic conditions. This strategy allows investors to make the strategic decision to invest across the broad spectrum of global credit sectors while placing the tactical sector, country, industry and issuer decisions with PIMCO, thereby optimizing credit market exposure amid changing economic and market environments.
Diversified Income differs from typical fixed income strategies where returns tend to be driven mainly by changes in interest rates within developed markets. Adding a Diversified Income strategy to a traditional fixed income portfolio has the potential to both increase portfolio yield and reduce the overall volatility. As such, this strategy may serve as both a complement to a traditional fixed income portfolio or as a replacement for stand-alone allocations to individual segments of the global credit market.
PIMCO’s Diversified Income strategy focuses on adding potential value through effective sector rotation and incorporates a disciplined approach to credit selection. PIMCO’s philosophy and approach to global credit markets is consistent with our conservative, yet innovative, approach toward fixed income markets in general. Specifically, the philosophy for investing in global corporate and sovereign credit markets embodies four key principles:
Past performance is not a guarantee or a reliable indicator of future results. All investments contain risk and may lose value. 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. High-yield, lower-rated, securities involve greater risk than higher-rated securities; portfolios that invest in them may be subject to greater levels of credit and liquidity risk than portfolios that do not. PIMCO strategies utilize derivatives which may involve certain costs and risks such as liquidity, interest rate, market, credit, management and the risk that a position could not be closed when most advantageous. Investing in derivatives could lose more than the amount invested. 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. Diversification does not ensure against loss.
This material contains the current opinions of the manager and such opinions are subject to change without notice. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.
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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