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The Total Return strategy offers diversification, and the possibility of higher investment returns relative to money market instruments. It searches for value in every sector of the bond market with the objective of achieving high risk-adjusted returns. Thus, the strategy could be used as a “core” fixed income holding in any portfolio. Investors seeking to balance equity holdings in an aggressive investment portfolio with a more stable investment option should consider the Total Return strategy. History has shown that there is a relatively low correlation between the equity and fixed income markets. Therefore, employing the Total Return strategy in combination with an equity portfolio allows for greater diversification and potentially reduces the risk of swings in the portfolio’s value.
Our Total Return philosophy is founded on the principle of diversification. We believe that no single strategy should dominate returns. By relying on multiple sources of value that arise from a diversified portfolio, we seek to generate a solid, consistent track record. Our investment process utilizes both “top-down” and “bottom-up” strategies. Top-down strategies focus on duration, yield curve positioning, volatility, and sector rotation. These strategies are deployed from a macro view of the portfolio 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 the designated objectives. Bottom-up strategies drive our security selection process and facilitate the identification and analysis of undervalued securities. Here, we employ advanced proprietary analytics and expertise in all major fixed income sectors. The objective is to combine perspectives from both the portfolio and security levels to consistently add value over time within acceptable levels of portfolio risk.
Avoiding Extreme Durations
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. 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. 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.
Barclays Capital U.S. Aggregate Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. These major sectors are subdivided into more specific indices that are calculated and reported on a regular basis. 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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