Text on screen: PIMCO
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ESTEBAN BURBANO: We talk about a macro environment with relatively strong growth, relatively managed inflation. It would seem like a very attractive investment environment, one that income has used to deliver a strong outcome, not just in 2026, but we hope so going forward.
Text on screen: Esteban Burbano, FIXED INCOME STRATEGIST
As we look ahead on 2026 how will you summarize the positioning of the portfolio from a, interest rate risk perspective, a credit risk perspective, or overall risk taking perspective?
Text on screen: Daniel J. Ivascyn, GROUP CHIEF INVESTMENT OFFICER
DAN IVASCYN: Yeah. Well, we talked a little bit about the macro environment earlier and I think what's always important is to look at your macro outlook relative to what's being priced into markets. So the problem with the current setup at least as it relates to certain sectors of the market, is that there's a lot of optimism embedded in stock market valuations, credit spreads, particularly corporate credit spreads which are trading near all-time tights.
So from the income strategies perspective, what we're trying to do is to take advantage of a diversified portfolio, maintain as much liquidity and what liquidity means is future flexibility and to insulate the portfolio from extreme economic sensitivity, where spreads again are quite tight when you're not getting paid a lot to take those types of risks.
So our overall philosophy is not too different than where we were at the start of the year. We want to use, again, all the tools of the PIMCO toolkit, a global opportunity set, an up in quality bias to generate attractive yields in a diversified, in a creative, and a resilient fashion. And what that means is continued underweight to corporate credit, particularly some of the more economically sensitive areas of the market.
Things like senior secured bank loans, some of the riskier areas of the less liquid credit markets, even private credit markets and up in quality focus looking to buy assets backed by middle income and higher income households in the United States to a slightly lesser degree in the UK and in Europe, then take advantage of other higher quality areas of the market in some cases, you know, with some pretty solid technical tailwinds, agency mortgage backed securities, other high quality even triple A rated structured products.
High quality inflation protected assets sourced in the United States, and a few other, you know, key areas around the world. Exposures to sovereign credits higher quality emerging market type assets, higher quality areas of the developed world where you have a very strong fiscal picture in some cases, even higher yields than you can source in the United States despite more economic fragility in those economies.
So again, the key theme is diversification up in quality, up in overall flexibility or liquidity while standing poised to react to what we think will be a series of attractive special situation type investments, some unique, you know, bottoms up type sources of yield and return as the year progresses.
Disclosure
The discussion and content provided herein has been extracted from a webcast and is intended for informational purposes and may not be appropriate for all investors. The information included herein is not based on any particularized financial situation, or need, and is not intended to be, and should not be construed as, a forecast, research, investment advice or a recommendation for any specific PIMCO or other security, strategy, product or service. Fixed income is only one possible portion of an investor’s portfolio, which can also include equities and other products. Past performance is not a guarantee of future results. All investments contain risk and may lose value. Investors should speak to their financial advisors regarding the investment mix that may be right for them based on their financial situation and investment objective.
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 risks, including market, interest rate, issuer, credit, inflation risk, and liquidity risk. The value of most bonds and bond strategies are impacted by changes in interest rates. Bonds and bond strategies with longer durations tend to be more sensitive and volatile than those with shorter durations; bond prices generally fall as interest rates rise, and low interest rate environments increase this risk. Reductions in bond counterparty capacity may contribute to decreased market liquidity and increased price volatility. Bond investments may be worth more or less than the original cost when redeemed. Inflation-linked bonds (ILBs) issued by a government are fixed income securities whose principal value is periodically adjusted according to the rate of inflation; ILBs decline in value when real interest rates rise. Treasury Inflation-Protected Securities (TIPS) are ILBs issued by the U.S. government. 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. Currency rates may fluctuate significantly over short periods of time and may reduce the returns of a portfolio. Mortgage and asset-backed securities may be sensitive to changes in interest rates, subject to early repayment risk, and their value may fluctuate in response to the market’s perception of issuer creditworthiness; while generally supported by some form of government or private guarantee there is no assurance that private guarantors will meet their obligations. Structured products such as collateralized debt obligations are also highly complex instruments, typically involving a high degree of risk; use of these instruments may involve derivative instruments that could lose more than the principal amount invested. High-yield, lower-rated, securities involve greater risk than higher-rated securities; portfolios that invest in them may be subject to greater levels of credit and liquidity risk than portfolios that do not. Equities may decline in value due to both real and perceived general market, economic, and industry conditions. Derivatives 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.. Diversification does not ensure against loss..
The credit quality of a particular security or group of securities does not ensure the stability or safety of an overall portfolio. The quality ratings of individual issues/issuers are provided to indicate the credit-worthiness of such issues/issuer and generally range from AAA, Aaa, or AAA (highest) to D, C, or D (lowest) for S&P, Moody’s, and Fitch respectively.
Statements concerning financial market trends or portfolio strategies are based on current market conditions, which will fluctuate. There is no guarantee that these investment strategies will work under all market conditions or are appropriate for all investors and each investor should evaluate their ability to invest for the long term, especially during periods of downturn in the market. Outlook and strategies are subject to change without notice.
This material contains the 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. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.
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CMR2026-0204-5190637