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Unlocking Value in “Special Situations”

For those seeking income, select companies or sectors contending with pandemic-driven disruption and other complex issues could harbor long-term value.

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Text on screen: PIMCO

Text on screen: PIMCO provides services only to qualified institutions and investors. This is not an offer to any person in any jurisdiction where unlawful or unauthorized.

Text on screen: Jamie Weinstein, Portfolio Manager, Head of Corporate Special Situations

Jamie: At PIMCO, we believe that tapping into an expanded opportunity set will be key to helping investors pursue their income goals, and one area where we see opportunities is in special situations.

What do we mean by special situations? It's really a broad set of opportunities across different types of markets, primarily within credit, but also things that might be more equity-like in nature, where there's some significant complexity around a situation. If you think about a corporate issuer, for example, it might be a company in transition facing a market dislocation for their goods or services, maybe a change in their supplier base. Could be a problem within their capital structure, with a debt maturity they may not be able to refinance, or a liquidity shortfall that they may be struggling to address. Any type of complexity like that, that requires a solution that may not be available in markets in ordinary course and requires creativity, is what you might think about in simple terms as special situations.

Why are we interested in special situations today? As we think about the backdrop post-COVID of a lot of companies coming off a period where there was dislocation in their businesses, there was a lot of capital formation in markets, some companies borrowed a lot of money to survive, they're now going to need to resolve the issues in their business that maybe weren't fully resolved during the COVID period. In some cases, companies exit this environment with too much debt. In other cases, things changed in their markets, and now they need to invest in a different way in order to catch up. Any of these might present special situations investment opportunities.

A few of the forward-looking opportunities that we're seeing in special situations today, in many cases, one category relates to companies that were heavily impacted which COVID directly, so things in the travel and tourism sector would be one. Another category would be companies were changes in supply chains are significantly impact their profitability or the way they do business. It's obviously well-known and well-reported what's happened across supply chains. Those are just a couple of examples of things that we're looking at over the next 12 to 24 months.

How can investors access this opportunity? What kinds of mandates or vehicles might house these types of trades? There are a few different things. First of all, it has to be vehicles that are flexible and that have a longer-term investment horizon. So typically these are longer lock-up structures, of the like of closed-end funds, or interval funds, or private drawdown style funds, where investors commit their capital for a number of years.

We think there's quite a bit of opportunity across this special situations investing landscape. We continue to source interesting transactions and deploy capital across a number of the different types of ideas that I mentioned, and we continue to deploy resources of our firm in researching and identifying future opportunities.

Text on screen: For more insights and information, visit pimco.com

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Disclosure


IMPORTANT NOTICE

Please note that the following contains the opinions of the manager as of the date noted, and may not have been updated to reflect real time market developments. All opinions are subject to change without notice.

Statements concerning financial market trends or portfolio strategies are based on current market conditions, which will fluctuate. There is no guarantee that these investment strategies will work under all market conditions or are appropriate for all investors and each investor should evaluate their ability to invest for the long term, especially during periods of downturn in the market. Outlook and strategies are subject to change without notice.

There is no guarantee that these investment strategies will work under all market conditions or are appropriate for all investors and each investor should evaluate their ability to invest long-term, especially during periods of downturn in the market.

Private credit involves an investment in non-publically traded securities which are subject to illiquidity risk. Portfolios that invest in private credit may be leveraged and may engage in speculative investment practices that increase the risk of investment loss. Investments in Private Credit may also be subject to real estate-related risks, which include new regulatory or legislative developments, the attractiveness and location of properties, the financial condition of tenants, potential liability under environmental and other laws, as well as natural disasters and other factors beyond a manager’s control.

This material contains the 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. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

PIMCO as a general matter provides services to qualified institutions, financial intermediaries and institutional investors. Individual investors should contact their own financial professional to determine the most appropriate investment options for their financial situation. This is not an offer to any person in any jurisdiction where unlawful or unauthorized. | Pacific Investment Management Company LLC, 650 Newport Center Drive, Newport Beach, CA 92660 is regulated by the United States Securities and Exchange Commission. | PIMCO Asia Pte Ltd (Registration No. 199804652K) is regulated by the Monetary Authority of Singapore as a holder of a capital markets services licence and an exempt financial adviser. The asset management services and investment products are not available to persons where provision of such services and products is unauthorised. | PIMCO Asia Limited is licensed by the Securities and Futures Commission for Types 1, 4 and 9 regulated activities under the Securities and Futures Ordinance. PIMCO Asia Limited is registered as a cross-border discretionary investment manager with the Financial Supervisory Commission of Korea (Registration No. 08-02-307). The asset management services and investment products are not available to persons where provision of such services and products is unauthorised. | PIMCO Investment Management (Shanghai) Limited Unit 3638-39, Phase II Shanghai IFC, 8 Century Avenue, Pilot Free Trade Zone, Shanghai, 200120, China (Unified social credit code: 91310115MA1K41MU72) is registered with Asset Management Association of China as Private Fund Manager (Registration No. P1071502, Type: Other) | PIMCO Australia Pty Ltd ABN 54 084 280 508, AFSL 246862. This publication has been prepared without taking into account the objectives, financial situation or needs of investors. Before making an investment decision, investors should obtain professional advice and consider whether the information contained herein is appropriate having regard to their objectives, financial situation and needs. | PIMCO Japan Ltd, Financial Instruments Business Registration Number is Director of Kanto Local Finance Bureau (Financial Instruments Firm) No. 382. PIMCO Japan Ltd is a member of Japan Investment Advisers Association and The Investment Trusts Association, Japan. All investments contain risk. There is no guarantee that the principal amount of the investment will be preserved, or that a certain return will be realized; the investment could suffer a loss. All profits and losses incur to the investor. The amounts, maximum amounts and calculation methodologies of each type of fee and expense and their total amounts will vary depending on the investment strategy, the status of investment performance, period of management and outstanding balance of assets and thus such fees and expenses cannot be set forth herein. | PIMCO Taiwan Limited is managed and operated independently. The reference number of business license of the company approved by the competent authority is (110) Jin Guan Tou Gu Xin Zi No. 020. 40F., No.68, Sec. 5, Zhongxiao E. Rd., Xinyi Dist., Taipei City 110, Taiwan (R.O.C.). Tel: +886 2 8729-5500. | PIMCO Canada Corp. (199 Bay Street, Suite 2050, Commerce Court Station, P.O. Box 363, Toronto, ON, M5L 1G2) services and products may only be available in certain provinces or territories of Canada and only through dealers authorized for that purpose.| No part of this publication may be reproduced in any form, or referred to in any other publication, without express written permission. PIMCO is a trademark of Allianz Asset Management of America L.P. in the United States and throughout the world. ©2021, PIMCO.

CMR2021-1208-1949563

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