PIMCO is launching PIMCO Flexible Emerging Markets Income Fund (“EMFLX” or the “Fund”), what we believe to be the industry’s first interval fund focusing on emerging market debt. Pramol Dhawan, head of emerging markets, Dimitris Tsitsiragos, who leads emerging markets (EM) private credit originations, and Nikolas Skouloudis, portfolio manager, talk with Michael Story, product strategist, about why they believe EMFLX offers a better way to approach the asset class and may be an effective complement for investors already in alternative credit.

Q: What is an interval fund and why is PIMCO launching one now?

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The Author

Pramol Dhawan

Portfolio Manager

Nikolas Skouloudis

Portfolio Manager, Emerging Markets

Michael Story

Fixed Income Strategist, Emerging Markets


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Investors should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. This and other information are contained in the Fund’s prospectus, which may be obtained by contacting your investment professional or PIMCO representative or by visiting www.pimco.com. Please read the Fund’s prospectus carefully before you invest or send money.

No Prior History. The PIMCO Flexible Emerging Markets Income Fund (“EM Flex” or the “Fund”) is a newly organized, unlisted closed-end “interval fund.” Limited liquidity is provided to shareholders only through the Fund’s quarterly offers to repurchase between 5% to 25% (expected to be 5%) of its outstanding shares at net asset value. There is no secondary market for the Fund’s shares and none is expected to develop. Investors should consider shares of the Fund to be an illiquid investment.

Investments made by the Fund and the results achieved by the Fund are not expected to be the same as those made by any other PIMCO-advised fund, including those with a similar name, investment objective or policies.  A new or smaller fund’s performance may not represent how the fund is expected to or may perform in the long-term.  New funds have limited operating histories for investors to evaluate and new and smaller funds may not attract sufficient assets to achieve investment and trading efficiencies. New and smaller funds may also require a period of time before they are invested in securities that help meet their investment objectives and policies and achieve a representative portfolio composition. Fund performance may be lower or higher during this “ramp up” period and may also be more volatile than a fund that is fully invested.

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.

A word about risk: 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. 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. Corporate debt securities are subject to the risk of the issuer’s inability to meet principal and interest payments on the obligation and may also be subject to price volatility due to factors such as interest rate sensitivity, market perception of the creditworthiness of the issuer and general market liquidity. 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. 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. Sovereign securities are generally backed by the issuing government.  Portfolios that invest in such securities are not guaranteed and will fluctuate in value.

Investments in distressed loans and bankrupt companies are speculative and the repayment of default obligations contains significant uncertainties. Floating rate loans are not traded on an exchange and are subject to significant credit, valuation and liquidity risk.  The value of real estate and portfolios that invest in real estate may fluctuate due to: losses from casualty or condemnation, changes in local and general economic conditions, supply and demand, interest rates, property tax rates, regulatory limitations on rents, zoning laws, and operating expenses. Structured products such as collateralized loan obligations (CLOs) and collateralized debt obligations (CDOs) 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. 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. The use of leverage may cause a portfolio to liquidate positions when it may not be advantageous to do so to satisfy its obligations or to meet segregation requirements. Leverage, including borrowing, may cause a portfolio to be more volatile than if the portfolio had not been leveraged. The Fund may invest without limit in investment grade debt securities and in below investment grade debt securities (commonly referred to as “high yield” securities or “junk bonds”), including securities of defaulted, stressed and distressed issuers. The Fund is non-diversified, which means that it may invest its assets in a smaller number of issuers than a diversified fund.

Investors should carefully consider the Fund’s risks and investment objectives, as an investment in the Fund may not be appropriate for all investors and is not designed to be a complete investment program. Unlike typical closed-end funds an interval fund’s shares are not typically listed on a stock exchange. Although interval funds provide limited liquidity to investors by offering to repurchase a limited amount of shares on a periodic basis, investors should consider shares of the Fund to be an illiquid investment. Investments in interval funds are therefore subject to liquidity risk as an investor may not be able to sell the shares at an advantageous time or price. There is also no secondary market for the Fund’s shares and none is expected to develop. There is no guarantee that an investor will be able to tender all or any of their requested Fund shares in a periodic repurchase offer. Investment should be avoided where an investor/client has a short-term investing horizon and/or cannot bear the loss of some or all of their investment. It is possible that investing in the Fund may result in a loss of some or all of the amount invested.

Because of the risks associated with (i) the Fund’s intention to focus its investments in emerging market securities (and related currency exposures), (ii) the Fund’s ability to invest in mortgage-related and other asset-backed instruments and high yield securities, (iii) the Fund’s ability to purchase or originate loans (including subprime loans) and related instruments, including loans and other instruments purchased on alternative lending platforms, and (iv) the Fund’s ability to use leverage, an investment in the Fund should be considered speculative and involving a high degree of risk, including the risk of a substantial loss of investment.

The foregoing is only a description of certain key risks, and is not a complete enumeration of all risks to which the Fund will be subject. The Fund will be subject to numerous other risks not described herein. Investors must carefully review the Fund’s prospectus, and carefully consider the risks they assume when they invest in the Fund’s common shares.

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. References to future results should not be construed as an estimate or promise of results that a client portfolio may achieve.

PIMCO does not provide legal or tax advice. Please consult your tax and/or legal counsel for specific tax or legal questions and concerns. The discussion herein is general in nature and is provided for informational purposes only. There is no guarantee as to its accuracy or completeness. 

PIMCO as a general matter provides services to qualified institutions, financial intermediaries and institutional investors. Individual investors should contact their own financial professional to determine the most appropriate investment options for their financial situation. This material contains the opinions of the managers 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. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. PIMCO is a trademark of Allianz Asset Management of America L.P. in the United States and throughout the world. ©2021, PIMCO.

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