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PIMCO global bond strategies are actively managed to maximize total return potential while minimizing any increase in risk relative to the market benchmark. The dynamics of global fixed income markets represent a rich opportunity for tangible diversification and potential for better risk-adjusted returns over time.
Our approach seeks to outperform a broad fixed income benchmark (e.g., JPMorgan GBI Global Index and PIMCO Global Advantage Bond Index) on a consistent basis, while maintaining overall risk similar to the index. PIMCO’s approach to global bond investing has three key principles:
PIMCO divides value-added strategies into two groups: macro, or top-down strategies, and micro, or bottom-up security-specific strategies. With the firm’s secular and cyclical analysis as a foundation, the global portfolio management team works with PIMCO’s global investment committee to review global opportunities and monitor existing global holdings. We examine opportunities in four key areas: global bonds, currencies, cash management and relative value strategies. This is important because global markets will often offer substantial opportunities in one area and very few in another. The ability to use a variety of tools may increase returns as well as reduce overall risk relative to the benchmark, lessening the need to rely on any one area for the majority of the portfolio’s performance.
Fundamental to the process of risk control are the analytical tools available to measure and monitor volatility in the portfolio. PIMCO has invested considerable resources in developing its own proprietary models to help in this analysis. These models include our Bonds Under Management report, which gives extensive summary information of portfolio holdings; a Risk Optimizer, which indicates an optimum portfolio structure for a set of expected returns, volatilities, and correlations; and our own proprietary Level, Slope and Curvature model, which was designed to give a more accurate measure of individual security and portfolio risk than traditional duration and convexity analysis.
Extensive use of analytical models allows us to leverage our investment professionals and provides a dispassionate check on our investment decisions. It also permits us to perform attribution analysis to determine which strategies are consistently adding value.
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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