For many investors, stock market exposure represents an important expected driver of long-term capital appreciation. However, equity markets do not always deliver positive returns and often are characterized by periods of high volatility. Consequently, many investors seek strategies that will provide exposure to the long-term growth benefits of owning stocks, while allowing for better downside risk mitigation.
To meet these needs, PIMCO has introduced a long/short equity strategy which aims to provide a positive return with lower volatility than the equity market over the long term. Although the strategy does not explicitly aim to manage short-term volatility, it has greater ability than many traditional long-only strategies to manage downside risk, which provides the opportunity for strong risk-adjusted returns over a full market cycle.
The PIMCO Long/Short Equity Strategy is a concentrated, long-biased equity strategy with the ability to actively manage equity market exposure by adjusting the portfolio’s mix of long and short equity, and cash or cash equivalent positions. The strategy, which has nearly a 10-year track record, uses both top-down and bottom-up analysis to construct a high-conviction portfolio of long positions with selective shorts. The strategy’s concentrated and deeply researched equity portfolio looks to capture and magnify gains when markets rise. At the same time, the strategy has greater ability to manage downside risk given its flexibility to hold cash and selectively short stocks. Unlike many strategies that have a limited ability to raise significant cash, let alone short, the strategy’s flexible approach facilitates access to additional sources of alpha and can result in reduced correlation with broader equity market indexes.