In the next five years, the global economy will likely follow a more uncertain, volatile, and divergent growth and inflation path than in the decade leading up to the pandemic. In this “Age of Transformation” (detailed here in our recent Secular Outlook), investors will likely see lower and more volatile returns across asset classes.

Fixed income investors in particular face four major challenges in their ongoing search for yield – low and rising interest rates, the potential for higher long-term inflation, relatively tight credit spreads, and the risk that volatility could rise (for more details, see our Featured Solution on flexible fixed income). The prospect of higher interest rates from the Fed’s tightening cycle and ongoing geopolitical risks also have many advisors concerned about their clients’ fixed income allocations.

These conditions could lead to a wider dispersion of returns across sectors and make it difficult for advisors and their clients to generate income responsibly, as stepping out further on the risk spectrum may derail a client’s long-term goals. We believe PIMCO Model Portfolios are well positioned to meet the challenges ahead due to their broad diversification, ability to span a range of objectives, and their actively managed duration exposure.

PIMCO fixed income model portfolios: flexibility and a broad toolkit

Having flexibility and a broad toolkit are essential in today’s fixed income markets, as low yields and tight spreads cannot be overcome by a one-size-fits-all approach. To that end, PIMCO offers a range of outcome-oriented fixed income model portfolios designed to address specific client objectives, such as preserving capital, diversifying exposure to equities, and generating attractive levels of income.

We also offer both Taxable and Tax-Aware Fixed Income Models for different levels of tax sensitivity.

These Models primarily draw on our flagship funds as their core and core complement, and are supplemented by sector-specific strategies to seek broader diversification and the opportunity to source attractive yields across global bond markets. Both the allocation decisions across the funds as well as the underlying strategies leverage our active investment process, which combines PIMCO’s forward-looking economic views and rigorous credit research in seeking to help clients address their goals even in challenging environments.

To counter the risk of further increases in rates and inflation, our Models have the flexibility to reduce duration, while certain Models may be able to add inflation-related and/or floating-rate securities and take more-focused positions at points on the yield curve we believe are most attractive.

Additionally, to address the potential for elevated volatility, we can prioritize high quality bonds where possible in order to tilt our model portfolios toward higher-quality “bend but don’t break” positions.

PIMCO fixed income model portfolios: more options for advisors

While advisors work with clients to navigate this difficult environment, they’re also being asked to provide a broader suite of services and find new client relationships to build their businesses. As many advisors have revamped their business models to broaden their value proposition and focus more on holistic financial planning services, the support systems offered to them have also expanded.

Asset managers are helping advisors transition to a models- based practice by providing practice management content and marketing collateral. Additionally, asset managers have ramped up product development efforts, placing a greater emphasis on launching more outcome-oriented models that can complement traditional risk-based multi-asset portfolios.

As a result, model portfolios have evolved from an “all or nothing” concept to a resource that advisors can flexibly use to address a variety of specific client needs while retaining the level of discretion that’s most appropriate for their practice. For example, advisors can pair a PIMCO Fixed Income Model with their own selection of equity managers to create multi-asset portfolios tailored to a client’s risk tolerance.

PIMCO Fixed Income Models can be used to address a number of objectives, ranging from capital preservation to income generation, so having a diverse mix of potential building blocks is essential for advisors to address unique client needs.

For advisors wishing to maintain discretion, PIMCO Models can be used as a tool to visualize our investment outlook and provide prescriptive guidance on the number of line items and position-sizing of strategies across different client objectives. In other words, rather than simply listing potential ingredients, asset manager models now detail the suggested recipe for seeking specific outcomes.


The more uncertain, volatile, and divergent growth and inflation path we see ahead will likely create an even more difficult environment for fixed income investors, who already face low interest rates and tight credit spreads. Yet we believe PIMCO Models are well positioned to capitalize on disruption- driven investment opportunities and help advisors deliver on the full range of client objectives.

For advisors seeking to add value for clients in this challenging environment, PIMCO’s flexible Fixed Income Models allow advisors to maintain control over their clients’ portfolios while freeing them up to provide financial planning and other services. As a partner to advisors who use models as an investment solution or as a tool to make more informed investment decisions, PIMCO Models and the support we offer will continue to evolve as needs change.

1 A Tax Aware Model Portfolio allocates to a minimum of 50 percent municipal bond funds. A portfolio managed to a Tax Aware Model will experience a taxable event. PIMCO does not provide legal or tax advice. Please consult your tax and/or legal counsel for specific tax or legal questions and concerns.

2 Model asset class exposure is obtained though the Underlying Fund holdings. The Models do not allocate directly to individual securities. Each Model has a defined opportunity set and asset class exposure will be limited to the investment strategies of the Underlying Funds as defined within its prospectus. Please refer to each Fund’s prospectus or summary prospectus, if available, prior to investing in a PIMCO Model.

3 “Bend-but-not-break” refers to credits that PIMCO would not expect to default in a credit-stressed environment.

The Author

Justin Blesy

Asset Allocation Strategist

Ryan McMahon

Global Wealth Management

Mark Thomas

Account Manager, Global Wealth Management



The PIMCO Models described in this material are available exclusively through investment professionals.

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PIMCO Model allocations are licensed or otherwise made available to investment professionals. PIMCO Models’ allocations are updated on a defined production cycle. The Underlying Funds are available by prospectus only. Implementing investment professionals may or may not implement the PIMCO Model’s allocation as provided, and actual allocations to Underlying Funds may vary. There are expenses associated with the Underlying Funds in addition to any fees charged by implementing investment professionals. Additionally, the implementing investment professional may include cash allocations, which are not reflected herein.

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.

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