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Our investment process utilizes both “top-down” and “bottom-up” strategies, diagrammed on the next page. Top down strategies are driven by our secular outlook of the forces likely to influence the economy and financial markets over the next three to five years and our cyclical views of two- to four-quarter trends. Implementation in portfolios is effected by selecting securities that achieve these designated objectives. Bottom up strategies drive our security selection process and facilitate the identification and analysis of undervalued securities. By combining perspectives from both the portfolio and security levels, we strive to add value over time within acceptable levels of portfolio risk.
Risk management has been a major concern at PIMCO since our inception 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, a set of appropriate investment guidelines and effective risk measures are developed. 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, portfolio holdings are priced and re-evaluated 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.
Past performance is not a guarantee or a reliable indicator of future results. Money market strategies are not insured or guaranteed by the FDIC or any other government agency and although they seek to preserve the value of your investment, it is possible to lose money by investing in the strategy. Investing in the bond market is subject to certain risks including market, interest-rate, issuer, credit, and inflation risk. Certain U.S. Government securities are backed by the full faith of the government, obligations of U.S. Government agencies and authorities are supported by varying degrees but are generally not backed by the full faith of the U.S. Government; portfolios that invest in such securities are not guaranteed and will fluctuate in value. The credit quality of a particular security or group of securities does not ensure the stability or safety of the overall portfolio. Diversification does not ensure against loss.
The Citigroup 3-Month Treasury Bill Index is an unmanaged index representing monthly return equivalents of yield average of the last three 3-Month Treasury Bills issues (excluding the current month-end bill). It is not possible to invest directly in an unmanaged index.
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, 840 Newport Center Drive, Newport Beach, CA 92660, 800-387-4626. ©2014, PIMCO.
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