Total Return Update

Total Return Fund

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PIMCO Total Return Fund performance after fees (Class A)


The PIMCO Total Return Fund returned -0.52% after fees in Q2 2018, underperforming the Bloomberg Barclays U.S. Aggregate Index by 0.36%. Year-to-date the fund has returned -1.87% after fees, underperforming the benchmark by 0.25%.

Risk sentiment waned toward the end of the quarter amid geopolitical turmoil and escalating trade tensions. Still, developed market equities ended the quarter higher even as credit spreads widened. Divergent growth momentum and central bank activity between the U.S. and other developed regions supported the U.S. dollar, which contributed to weakness in EM assets. In the U.S., the Fed hiked its policy rate and signaled two more increases in 2018, while softer economic data releases in other developed regions prompted more cautious rhetoric from several central banks including the BoE and ECB.

As of 30 June 2018. Source: PIMCO, Bloomberg.

Prices & Performance

  • Average Annual Returns
  • Cumulative Returns

All data as of

  • Daily
  • Month End
  • Quarter End

All data as of

  • Daily
  • Month End
  • Quarter End

Performance quoted represents past performance. Past performance is not a guarantee or a reliable indicator of future results. Investment return and the principal value of an investment will fluctuate. Shares may be worth more or less than original cost when redeemed. Current performance may be lower or higher than performance shown. For performance current to the most recent month-end, visit www.PIMCO.com or call (888) 87-PIMCO.

The maximum offering price (MOP) returns take into account the 3.75% maximum initial sales charge. PIMCO Total Return Fund Class A expense ratio is 0.85%.

Current portfolio positioning and strategy

Over the secular horizon, we expect a very different macro landscape to emerge, reflecting shifts in the monetary-fiscal policy mix, rising protectionism and economic nationalism, and the potential for a recession over the next 3-5 years. Our cyclical outlook, however, remains more favorable: we expect world GDP growth to remain above-trend at 3.0%‒3.5% in 2018 as fiscal policy helps sustain solid growth and inflation rises modestly. Compared with our December forecast, we see marginally higher 2018 GDP growth in developed regions. Our inflation forecasts for 2018 are also higher compared to our December forecast in response to a higher oil price trajectory.

Duration

We are underweight duration overall. We have a preference for U.S. duration against rate exposure in other developed regions, including the U.K. and Japan.

Curve

The intermediate portion of the curve continues to offer attractive characteristics while longer-term rates may rise as the Fed continues to reduce accommodation and term premiums return.

Credit selection

We find attractive opportunities in specific credits that benefit from U.S. growth and a resurgent housing sector. We see value in banks and select financial companies as well as housing-related credits.

Currency positioning

We remain tactical with currency positioning, particularly given less conviction in the overall direction of the dollar. Select high carry EM FX may be attractive as diversifying risk exposures.


As of 30 June 2018

Market Value table
Market Value table


Duration table
Duration table
1 Short duration emerging markets instruments includes an emerging market security or other instrument economically tied to an emerging market country by country of risk with an effective duration less than one year and rated investment grade or higher or if unrated, determined to be similar quality by PIMCO. Emerging Markets includes the value of short duration emerging markets instruments previously reported in another category.

2 May include municipals, convertibles, preferreds, and yankee bonds.

3 Net Other Short Duration Instruments includes securities and other instruments (except instruments tied to emerging markets by country of risk) with an effective duration less than one year and rated investment grade or higher or, if unrated, determined by PIMCO to be of comparable quality, commingled liquidity funds, uninvested cash, interest receivables, net unsettled trades, broker money, short duration derivatives (for example Eurodollar futures) and derivatives offsets. With respect to certain categories of short duration securities, the Adviser reserves the discretion to require a minimum credit rating higher than investment grade for inclusion in this category. Derivatives Offsets includes offsets associated with investments in futures, swaps and other derivatives. Such offsets may be taken at the notional value of the derivative position which in certain instances may exceed the actual amount owed on such positions.

Portfolio information in the charts is based on the fund's net assets. These percentages may differ from those used for the fund's compliance calculations, including the fund's prospectus, regulatory, and other investment limitations and policies, which may be based on total assets of the fund or other measurements, may include or exclude various categories of investments from those covered in the portfolio allocation categories shown in this report, and may be based on different classifications and measurements of the fund’s investments and other criteria.

All holdings are subject to change daily. All share classes have the same portfolio but different expenses.

Duration is a measure of a portfolio’s price sensitivity expressed in years. Effective duration is the duration for a bond with an embedded option when the value is calculated to include the expected change in cash flow caused by the option as interest rates change.

A Legacy of Outperformance


PIMCO Total Return Fund has aimed to serve as a true core bond anchor for investors’ portfolios for more than three decades. The fund has outperformed its benchmark since its inception by taking a conservative, diversified approach and using a variety of active management strategies to add value. These results reflect the power of PIMCO’s rigorous investment process and vast global resources, as well as the expertise of the fund’s three talented portfolio managers, who have been working together at PIMCO for more than 15 years and have an average of 21 years of investment experience each.

allocation chartallocation chart

As of 30 June 2018

Performance quoted represents past performance and is not a guarantee or a reliable indicator of future results. Investment return and the principal value of an investment will fluctuate. Shares may be worth more or less than original cost when redeemed. Current performance may be lower or higher than average annual returns shown. Performance quoted does not reflect any sales charges, if applicable, and performance would be lower if it did.

Differences in the Fund’s performance versus the index and related attribution information with respect to particular categories of securities or individual positions may be attributable, in part, to differences in the pricing methodologies used by the Fund and the index.

No assurance is being made that any fund that may have experienced high or unusual performance for one or more periods will continue to experience such performance. High performance is defined as an unusual growth in alpha between reporting periods or total return when measured to historical returns. Unusual performance is defined as an unusual change in performance (+/-) between reporting periods and the portfolio experienced unusual performance for one or more periods.

Monthly Commentary

Download the Monthy Commentary for more information about recent Total Return Fund performance.

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Disclosures

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

Past performance is not a guarantee or a reliable indicator of future results. The performance figures presented reflect the total return performance and reflect changes in share price and reinvestment of dividend and capital gain distributions. All periods longer than one year are annualized. The minimum initial investment for Institutional class shares is $1 million; however, it may be modified for certain financial intermediaries who submit trades on behalf of eligible investors.

Investments made by a Fund and the results achieved by a 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.  A Fund may be forced to sell a comparatively large portion of its portfolio to meet significant shareholder redemptions for cash, or hold a comparatively large portion of its portfolio in cash due to significant share purchases for cash, in each case when the Fund otherwise would not seek to do so, which may adversely affect performance.


Differences in the Fund’s performance versus the index and related attribution information with respect to particular categories of securities or individual positions may be attributable, in part, to differences in the pricing methodologies used by the Fund and the index.


There is no assurance that any fund, including any fund that has experienced high or unusual performance for one or more periods, will experience similar levels of performance in the future. High performance is defined as a significant increase in either 1) a fund’s total return in excess of that of the fund’s benchmark between reporting periods or 2) a fund’s total return in excess of the fund’s historical returns between reporting periods. Unusual performance is defined as a significant change in a fund’s performance as compared to one or more previous reporting periods.

A Word About Risk: 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 the current low interest rate environment increases this risk. Current 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. 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. 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. Management risk is the risk that the investment techniques and risk analyses applied by an investment manager will not produce the desired results, an