PIMCO | Global Multi-Asset Strategy

Global Multi-Asset Strategy

Strategy Overview

In a complex and constantly evolving global economy where sudden market shocks or “black swans” occur with alarming frequency, investors need to reassess how to best achieve their investment objectives while managing downside risk. In the new investment landscape, simply investing in stocks and bonds may not be enough and investors should consider additional sources of portfolio diversification. The Global Multi-Asset strategy is a comprehensive asset allocation solution and designed to be a complete expression of PIMCO’s macroeconomic investment views across major asset classes including global equities, global bonds, diversified commodities and real estate.

The strategy combines a differentiated “risk factor”–based approach to asset allocation with PIMCO’s strategic insight on the global macroeconomy to construct a portfolio that is highly diversified not only across asset classes, but also across global risk factors. Another key differentiating feature of the investment strategy is the use of a systematic approach to tail risk hedging that seeks to help protect the portfolio against sudden market shocks by purchasing inexpensive hedges across various liquid markets.

The strategy offers daily liquidity to investors and obtains desired portfolio exposures through a combination of various PIMCO strategies, unaffiliated funds (e.g., Exchange Traded Funds [ETFs]) and direct security holdings. The portfolio is managed by a team of three highly experienced portfolio managers, led by Dr. Mohamed El-Erian, PIMCO’s CEO and co-CIO.

Applications for the Global Multi-Asset Strategy

Core Portfolio Holding: The Global Multi-Asset strategy is intended to be a comprehensive portfolio solution and designed to be a core portfolio holding. It is a compelling alternative to a static, 60/40 stock/bond style asset allocation portfolio.

Diversify Asset Allocation Approaches: Given that asset allocation may be the primary driver of portfolio returns, exposure to multiple asset classes and managers may not provide adequate portfolio diversification if asset allocation decisions are driven by a single approach or model. Investors may consider allocating to Global Multi-Asset strategy to diversify asset allocation approaches within their portfolios.

Absolute Return Allocation: The strategy has an absolute return orientation over a business cycle and can be included in the absolute return or alternatives portion of a multi-asset portfolio.

Investment Philosophy and Sources of Added Value

The Global Multi-Asset strategy offers investors a comprehensive portfolio solution by integrating PIMCO’s top-down views on global macroeconomy, bottom-up security selection across multiple asset classes and dedicated downside hedging in a single product.

Historically and traditionally, asset class diversification has been used as a proxy for risk diversification. However, PIMCO believes this is a sub-optimal proxy for investors amid a turbulent global economy. The Global Multi-Asset strategy expresses PIMCO’s views on key risk factors through global equities, global bonds and real assets. The result of the asset allocation process is a portfolio that is diversified not only across global asset classes, but also across global risk factors.

Historical asset class relationships change significantly during periods of market stress. Instead of relying on history, the Global Multi-Asset strategy features a qualitative, forward-looking asset allocation process for making asset allocation decisions.

Risk Management/Controls

The Global Multi-Asset strategy places risk management in the heart of the asset allocation process. Traditional asset allocation approaches tend to underestimate the probability of extreme events and rely on de-risking the portfolio in an effort to protect against market shocks. This “just-in-time” approach to risk management is often too little, too late. In contrast, the Global Multi-Asset strategy uses a systematic approach to tail risk hedging where a small portion of the portfolio is dedicated to buying inexpensive hedges that seek to protect the portfolio from sudden market crises. The result is a portfolio that aims to provide investors with lower downside risk and improved long-term portfolio return potential.

How To Invest

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. Commodities contain heightened risk including market, political, regulatory, and natural conditions, and may not be suitable for all investors. The value of real estate and portfolios that invest in real estate may fluctuate due to: losses from casualty or condemnation, changes in local and general economic conditions, supply and demand, interest rates, property tax rates, regulatory limitations on rents, zoning laws, and operating expenses. 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 this investment strategy will work under all market conditions and each investor should evaluate their ability to invest for a 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.

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