What is Tax Managed Real Return Strategy?

The Tax Managed Real Return Strategy is an actively managed portfolio that seeks to provide after tax inflation protected return. The strategy aims to achieve this by typically investing in a portfolio of high-credit quality, intermediate-maturity municipal bonds with an inflation overlay that explicitly hedges against the deterioration in purchasing power that inflation can cause. The overlay targets a return linked to the rate of U.S. inflation as measured by the Consumer Price Index (CPI). Because interest payments on municipal bonds are exempt from federal and, in some cases, state taxes, it is expected that a majority of the income earned by investors in the strategy will also be federally tax free.

The Tax Managed Real Return Strategy draws on the expertise of both PIMCO’s Real Return Team and its Municipal Bond Team with the aim to create a tax efficient source of inflation protection.

The Tax Managed Real Return Strategy Provides Investors with the Opportunity for:

  • Attractive income from municipal bonds, which is typically exempt from federal and, in some cases, state taxes while also intending to avoid exposure to municipal bonds subject to AMT (Alternative Minimum Tax)

  • A hedge against inflation, which can help preserve purchasing power

  • Potential for capital gains from active management driven by PIMCO’s proven investment process

How To Invest

Related Strategies


Fixed Income


Past performance is not a guarantee or a reliable indicator of future results. All investments contain risk and may lose value. Investing in the bond market is subject to certain risks including market, interest rate, issuer, credit, and inflation risk. Income from municipal bonds may be subject to state and local taxes and at times the alternative minimum tax. Inflation-linked bonds (ILBs) issued by a government are fixed-income securities whose principal value is periodically adjusted according to the rate of inflation; ILBs decline in value when real interest rates rise. Treasury Inflation-Protected Securities (TIPS) are ILBs issued by the U.S. Government. Certain U.S. Government securities are backed by the full faith of the government, obligations of U.S. Government agencies and authorities are supported by varying degrees but are generally not backed by the full faith of the U.S. Government; portfolios that invest in such securities are not guaranteed and will fluctuate in value. PIMCO strategies utilize derivatives which 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 credit quality of a particular security or group of securities does not ensure the stability or safety of the overall portfolio. There is no guarantee that this investment strategy will work under all market conditions and each investor should evaluate their ability to invest for a long-term especially during periods of downturn in the market. Please consult your tax and/or legal counsel for specific tax questions and concerns.

The Consumer Price Index (CPI) is an unmanaged index representing the rate of inflation of the U.S. consumer prices as determined by the U.S. Department of Labor Statistics. There can be no guarantee that the CPI or other indexes will reflect the exact level of inflation at any given time. It is not possible to invest directly in an unmanaged index.

This material contains the current opinions of the manager 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.