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Short-Term Strategies

Is your cash allocation pulling its weight?

What role can short-term strategies play in portfolios?

Active short-term bond strategies may offer a more attractive return profile than traditional cash in exchange for a modest increase in risk.

  • Enhance yield. With interest rates at historic lows, over-allocations to cash could mean investors have less earning potential.
  • De-risk portfolio. Shortening duration can help reduce interest rate risk and limit overall volatility.
  • Navigate changing rates. Flexibility and a defensive mindset are crucial to finding attractive opportunities at the front-end of the yield curve.
Stepping Out from Cash: A Look at the Risk/Reward Potential of PIMCO’s Short-Duration Strategies

*Short-term investments will be more volatile than traditional cash investments and their value will fluctuate. The investments may also invest a portion of their total assets in junk bonds. Short-term strategies are not federally guaranteed and may lose value.

Why PIMCO for short term?

$137+ billion

In dedicated money market, short-term, and low duration strategies (as of 9/30/2020)

$245+ billion

In cash-equivalent securities across the firm (as of 9/30/2020)

30+ years

Experience successfully managing short duration strategies

Straight From PIMCO: Time to Be Conscious of Your Cash

Jerome Schneider explains how investors seeking capital preservation may benefit from the additional yield premiums available beyond near-zero-yielding money market funds.

Highly experienced management team and award-winning portfolio managers

Jerome Schneider

Jerome Schneider

Managing Director

Head of Short-Term Portfolio Management

Morningstar Fixed-Income Fund Manager of the Year (2015)

Morningstar Fixed-Income Fund Manager of the Year (2015)

Scott Mather

Scott Mather

Managing Director

CIO U.S. Core Strategies

David Braun

David Braun

Managing Director

Head of US Financial Institutions Portfolio Management

Andrew Wittkop

Andrew T. Wittkop

Executive Vice President

Portfolio Manager, Treasuries, Agencies, Rates

Nathan Chiaverini

Nathan Chiaverini

Senior Vice President

Portfolio Manager, Short-Term Desk

Click on the manager for a list of products managed.

The Market Transition Away From LIBOR

A broad range of market participants from regulators to investors are preparing for the end of the London Interbank Offered Rate (“LIBOR”) as a benchmark for trillions of dollars of financial instruments.

The transition away from LIBOR is a global event impacting all aspects of financial markets (e.g. investments, operations, technology, legal and regulatory) and PIMCO aims to arm clients with the tools and information necessary to navigate these changes.

  • 01What is LIBOR?

    LIBOR is widely used as a floating-rate benchmark index, as a reference rate for a wide range of securities and derivatives worldwide, and also as a signal for market liquidity and changes in financial conditions.

    It is estimated that $200 trillion of financial contracts and securities are tied to USD LIBOR according to the Securities Industry and Financial Markets Association.1

    1 As of 31 December 2019

  • 02Why is the market transitioning?

    Concerns regarding the reliability of LIBOR in the wake of bank manipulation of the rate in 2012 prompted regulators to develop alternative “risk-free benchmark” rates supported by more liquid and observable markets.

    PIMCO’s base case assumption is that LIBOR publication will cease at the end of 2021.

  • 03How is PIMCO responding?

    PIMCO is working closely with investors and regulators to navigate this transition. PIMCO is a participant in official sector working groups and will continue to provide input to establish and transition to alternative rates to LIBOR.

  • 04What are the replacement rates?

    The Federal Reserve System established the Alternative Reference Rates Committee (“ARRC”) to lead the transition away from LIBOR. The ARRC selected the Secured Overnight Funding Rate (“SOFR”) as the recommended alternative reference rate for the U.S.

    Similarly, working groups outside of the U.S. have nominated alternative reference rates in their funding currencies.

    Sterling: SONIA

    Swiss Franc: SARON

    Japanese Yen: TONA

    Euro: €STR

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Learn more about our short-term strategies

Talk with our team today.

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. Click here for a complete list of the PIMCO Funds prospectuses and summary prospectuses. Please read them carefully before you invest or send money.

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.

A word about risk:

The PIMCO funds are not federally guaranteed and it is possible to lose money investing in a fund. 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. Equities may decline in value due to both real and perceived general market, economic, and industry conditions. Derivatives 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.

Exchange Traded Funds ("ETF") are afforded certain exemptions from the Investment Company Act. The exemptions allow, among other things, for individual shares to trade on the secondary market. Individual shares cannot be directly purchased from or redeemed by the ETF. Purchases and redemptions directly with ETFs are only accomplished through creation unit aggregations or "baskets" of shares. Shares of an ETF are bought and sold at market price (not NAV). Brokerage commissions will reduce returns. Investment policies, management fees and other information can be found in the individual ETF’s prospectus.

Different fund types (e.g. ETFs, open-ended investment companies) and fund share classes are subject to different fees and expenses (which may affect performance). They may also have different minimum investment requirements and be entitled to different services.

Current holdings are subject to risk. Holdings are subject to change at any time. An investment in an ETF involves risk, including the loss of principal. Investment return, price, yield and Net Asset Value (NAV) will fluctuate with changes in market conditions. Investments may be worth more or less than the original cost when redeemed.

Buying or selling ETF shares on an exchange may require the payment of brokerage commissions. Due to the costs inherent in buying or selling Fund shares, frequent trading may detract significantly from investment returns. Investment in Fund shares may not be advisable for investors who expect to engage in frequent trading.

ETF shares may be bought or sold throughout the day at their market price on the exchange on which they are listed. However, there can be no guarantee that an active trading market for PIMCO ETF shares will develop or be maintained, or that their listing will continue or remain unchanged.

Investing in the bond market is subject to certain risks including the risk that fixed income securities will decline in value because of changes in interest rates; the risk that fund shares could trade at prices other than the net asset value; and the risk that the manager's investment decisions might not produce the desired results.

Premiums (when market price is above NAV) or discounts (when market price is below NAV) reflect the differences (expressed as a percentage) between the NAV and the Market Price of the Fund on a given day, generally at the time the NAV is calculated. A discount or premium could be significant. Data in chart format displaying the frequency distribution of discounts and premiums of the Market Price against the NAV can be found for each Fund at www.pimcoetfs.com.

Morningstar Rating™ as of 31 October 2020 for the institutional share class; other classes may have different performance characteristics. A rating is not a recommendation to buy, sell or hold a fund. The PIMCO Short-Term Fund was rated against the following numbers of Ultrashort Bond funds over the following time periods: Overall 5 Stars (170 funds rated); 3 Yrs. 4 Stars (170 funds rated); 5 Yrs. 5 Stars (130 funds rated); 10 Yrs. 5 Stars (61 funds rated). The PIMCO Short Asset Investment Fund was rated against the following numbers of Ultrashort Bond funds over the following time periods: Overall 3 Stars (170 funds rated); 3 Yrs. 3 Stars (170 funds rated); 5 Yrs. 3 Stars (130 funds rated). The PIMCO Low Duration Fund was rated against the following numbers of Short-Term Bond funds over the following time periods: Overall 3 Stars (512 funds rated); 3 Yrs. 3 Stars (512 funds rated); 5 Yrs. 3 Stars (455 funds rated); 10 Yrs. 3 Stars (297 funds rated). The PIMCO Enhanced Short Maturity Active Exchange-Traded Fund was rated against the following numbers of Ultrashort Bond funds over the following time periods: Overall 4 Stars (170 funds rated); 3 Yrs. 4 Stars (170 funds rated); 5 Yrs. 4 Stars (130 funds rated); 10 Yrs. 4 Stars (61 funds rated). The PIMCO Enhanced Low Duration Active Exchange-Traded Fund was rated against the following numbers of Short-Term Bond funds over the following time periods: Overall 4 Stars (512 funds rated); 3 Yrs. 4 Stars (512 funds rated); 5 Yrs. 4 Stars (455 funds rated). Past performance is no guarantee of future results. The Morningstar Rating™ for funds, or "star rating", is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods.

The Morningstar Fixed Income Fund Manager of the Year award (U.S.) is based on the strength of the manager, performance, strategy and firm's stewardship.

The Morningstar Analyst RatingTM is not a credit or risk rating. It is a subjective evaluation performed by Morningstar’s manager research group, which consists of various Morningstar, Inc. subsidiaries (“Manager Research Group”). In the United States, that subsidiary is Morningstar Research Services LLC, which is registered with and governed by the U.S. Securities and Exchange Commission. The Manager Research Group evaluates funds based on five key pillars, which are process, performance, people, parent, and price. The Manager Research Group uses this five-pillar evaluation to determine how they believe funds are likely to perform relative to a benchmark over the long term on a risk adjusted basis. They consider quantitative and qualitative factors in their research. For actively managed strategies, people and process each receive a 45% weighting in their analysis, while parent receives a 10% weighting. For passive strategies, process receives an 80% weighting, while people and parent each receive a 10% weighting. For both active and passive strategies, performance has no explicit weight as it is incorporated into the analysis of people and process; price at the share-class level (where applicable) is directly subtracted from an expected gross alpha estimate derived from the analysis of the other pillars. The impact of the weighted pillar scores for people, process and parent on the final Analyst Rating is further modified by a measure of the dispersion of historical alphas among relevant peers. For certain peer groups where standard benchmarking is not applicable, primarily peer groups of funds using alternative investment strategies, the modification by alpha dispersion is not used.

The Analyst Rating scale is Gold, Silver, Bronze, Neutral, and Negative. For active funds, a Morningstar Analyst Rating of Gold, Silver, or Bronze reflects the Manager Research Group’s expectation that an active fund will be able to deliver positive alpha net of fees relative to the standard benchmark index assigned to the Morningstar category. The level of the rating relates to the level of expected positive net alpha relative to Morningstar category peers for active funds. For passive funds, a Morningstar Analyst Rating of Gold, Silver, or Bronze reflects the Manager Research Group’s expectation that a fund will be able to deliver a higher alpha net of fees than the lesser of the relevant Morningstar category median or 0. The level of the rating relates to the level of expected net alpha relative to Morningstar category peers for passive funds. For certain peer groups where standard benchmarking is not applicable, primarily peer groups of funds using alternative investment strategies, a Morningstar Analyst Rating of Gold, Silver, or Bronze reflects the Manager Research Group’s expectation that a fund will deliver a weighted pillar score above a predetermined threshold within its peer group. Analyst Ratings ultimately reflect the Manager Research Group’s overall assessment, are overseen by an Analyst Rating Committee, and are continuously monitored and reevaluated at least every 14 months.

For more detailed information about Morningstar’s Analyst Rating, including its methodology, please go to https://shareholders.morningstar.com/investor-relations/governance/Compliance--Disclosure/default.aspx.

The Morningstar Analyst Rating (i) should not be used as the sole basis in evaluating a fund, (ii) involves unknown risks and uncertainties which may cause the Manager Research Group’s expectations not to occur or to differ significantly from what they expected, and (iii) should not be considered an offer or solicitation to buy or sell the fund.

© 2020 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.

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 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. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission.

PIMCO Investments LLC, distributor, 1633 Broadway, New York, NY 10019, is a company of PIMCO.

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