What is StocksPLUS® Long Duration?
StocksPLUS Long Duration is an investment strategy that may allow investors to capture the equity risk premium, reduce risk relative to liabilities, and achieve high risk adjusted return potential within a single portfolio. Compared to a traditional equity mandate, StocksPLUS Long Duration may offer a very high correlation of excess returns with liabilities, particularly when liabilities are rising. Further, for those considering extending duration with fixed income derivatives, StocksPLUS Long Duration may offer attractive operational and investment characteristics by capitalizing on PIMCO’s experience managing StocksPLUS since 1986 and Long Duration since 1988.
StocksPLUS Long Duration uses equity index derivatives, typically futures and sometimes swaps, to achieve non-leveraged passive stock market exposure. Because equity index ownership using futures and swaps typically only requires a very modest initial cash outlay, PIMCO invests the remaining cash in an actively managed bond portfolio which references the Barclays Capital Long-Term Government/Credit Bond Index. The goal is to provide equity market returns plus excess returns relative to the equity market which are highly correlated with interest rate sensitive liabilities. Equity exposure is managed with a focus on minimizing the cost associated with equity index futures and swap ownership, typically a money market-based cost. If the actively managed long duration bond portfolio outperforms money market rates, in most cases the StocksPLUS Long Duration strategy should deliver excess returns relative to the equity index.
We offer a variety of domestic, regional and international equity indexes in most developed markets as depicted below. Other indexes, such as emerging markets are currently available. Please feel free to inquire.