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What is Moderate Duration?PIMCO’s Moderate Duration strategy portfolios are best described as intermediate core portfolios that seek maximum total return through both current income and price appreciation, consistent with the preservation of capital and prudent risk taking. With our intermediate core bond assignments, we utilize all major sectors of the bond market while managing an average portfolio duration ranging between two and five years. In brief, we seek to consistently add value, while maintaining an overall risk level similar to the Barclays Capital Intermediate Government/Credit Index.
PIMCO has been managing assets using the Moderate Duration strategy since 1986. We aim to consistently outperform the market as represented by the Barclays Capital Intermediate Government/Credit Index.
Historically, the intermediate portion of the yield curve has produced some of the highest risk-adjusted returns in fixed income. Many fixed income investors tend to over-allocate assets to money market or short term portfolios and miss the opportunities provided by a moderate duration portfolio. Potential applications for PIMCO’s Moderate Duration strategy include:
PIMCO seeks to add value consistently while maintaining an overall risk level similar to the benchmark index.
Avoiding Extreme Durations
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 we believe 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. 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. Mortgage and asset-backed securities may be sensitive to changes in interest rates, subject to early repayment risk, and while generally supported by a government, government-agency or private guarantor there is no assurance that the guarantor will meet its obligations. 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 mo more than the amount invested. The credit quality of a particular security or group of securities does not ensure the stability or safety of the overall portfolio. 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.
The Barclays Capital Intermediate Government/Credit Index is an unmanaged index of U.S. Government or investment grade credit securities having a maturity of at least one year and less than 10 years. 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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