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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.
PIMCO has focused on risk management since our founding in 1971. As new technologies and financial instruments develop, we strive to ensure that our risk management procedures remain effective and that we stay ahead of our competition. We dedicate significant financial and intellectual resources to address risk management.
We feel risk manifests itself in two main forms – investment and operational. Effective investment risk management begins with the identification of client objectives and their level of risk aversion. From there, we develop a set of appropriate investment guidelines and effective risk measures. Advanced proprietary analytics allow us to model securities under a multitude of scenarios including best and worst cases. We believe the decision to hold a security is just as important as the decision to buy. As a result, we price and re-evaluate portfolio holdings on a regular basis.
Operational risk is equally as important as investment risk. Operational risk deals with problems or errors that may arise during day-to-day operations of the firm. Our organizational structure is designed to cope with this organizational risk. This is accomplished by segregating responsibilities for portfolio management, account management, and investment support monitored by an independent compliance group. At PIMCO, we have embraced this methodology from our inception and it has benefited both our clients and the organization as a whole. Our system has clearly defined checks and balances to provide reasonable assurance that all risk exposures are handled in an appropriate manner.
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. ©2015, PIMCO.
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