Commodities: Part of PIMCO’s Real Return Practice
Most investors’ liabilities are linked to inflation. As inflation raises prices, the nominal value of these liabilities rises also. But, all too often, stock and bond returns decline amid rising inflation. In addition, by owning a highly diversified set of assets – assets with low correlations to each other – investors can help enhance the overall stability of their portfolio under most market conditions. To meet investors’ needs for returns that are both diversified and resistant to inflation risk, PIMCO created its Real Return Practice. While the practice originally focused on the management of inflation-linked bond (ILB) portfolios, it has expanded to include real estate, tactical asset allocation and commodity investments. When managed properly, commodity investments have historically represented the asset class most highly correlated with inflation and least correlated with stock and bond returns. In other words, commodities are a hedge against inflation and a tool for diversification. And PIMCO also offers the capability to combine, in one integrated portfolio, exposure to both commodities and ILBs.