Leaving PIMCO.com

You are now leaving the PIMCO website.

Skip to Main Content
Economic and Market Commentary

Navigating Uncertainty with Alternative Investments

Gain insights on how investors can adapt to today’s market landscape from a panel discussion at our recent Alternatives Investor Conference.

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: What should alternative investors know about the economic outlook?

Images on screen: Daniel J. Ivascyn and Richard Clarida presenting at the alts conference

Text on screen: Daniel J. Ivascyn, Group Chief Investment Officer

Dan Ivascyn: We do think monetary policy operates with a lag. We think a lot of this post-COVID stimulus now is dissipating in terms of its influence on decisions. And then we have things like a government shutdown coming up but we are seeing some signs of deterioration within the household, both households and corporates, and plenty of other macro uncertainties. So we're a bit more cautious when we think about the rate markets at these levels.

Text on screen: What is the Fed going to do next?

Images on screen: Daniel J. Ivascyn and Richard Clarida presenting at the alts conference

Text on screen: Dr. Richard Clarida, Global Economic Advisor & Former FED Vice Chairman

Dr. Richard Clarida: The Fed has, in its baseline projections, really zeroed in on a soft landing scenario with really no recession and disinflation.

But I think that the road could be bumpy on the path to that soft landing. And I think our focus at PIMCO is the Fed's resolve eventually to get inflation down to 2 percent. And that's quite important. It helps to anchor the way that we think about investing.

The Fed likes it when people give big raises, but those raises have to be consistent with the underlying price inflation target of 2 percent. And that's probably the one piece of the puzzle from the Fed's point of view now that's not yet come into place.

If you're Jay Powell and the committee, as you're making that calculation on whether or not another hike is needed, you'll look at the overall tightening in financial conditions, and the Fed could well be done if this sticks.

Text on screen: What does this mean for alternatives investors?

Images on screen: Daniel J. Ivascyn and Richard Clarida presenting at the alts conference

Dan Ivascyn: We’re not out of the woods yet. There's certainly a chance you have a soft landing, but you could have a harder landing at a time where inflation remains elevated and where policymakers can't come to the rescue like they certainly did in COVID, but have also done in prior cycles.

And I think that's going to create opportunities in a lot of areas. Rich also mentioned bank regulation. It's highly uncertain. There's a lot of pressure from shareholders to clean up balance sheets. So we're seeing relatively healthy institutions step away from markets, look to partner, look to sell risk over the course of the last few months.

In Europe, in some sense these are markets where they're just less vibrant, even less flexibility. Even some of the type of open ended funds over in Europe have less ability to wait out this cycle. So even from a technical perspective over in Europe, some pretty exciting opportunities as well.

Text on screen: Where are the opportunities right now?

Images on screen: Daniel J. Ivascyn and Richard Clarida presenting at the alts conference

Dan Ivascyn: If you look today at the significant repricing we've seen in public markets, we tend to prefer opportunities there.

These are going to be great vintages, we believe, across the private opportunity set, and there's a whole range of flavors of opportunity there. You don't have to be wildly aggressive to generate very, very attractive returns.

But in general, good forward value in privates, good current value in publics today.

We like agency mortgages. That's a sector where we don't think you have to rush into that space across our alternative strategies. It's a high quality asset. It's a reasonably liquid asset. We think it's poised to do well when and if interest rate volatility begins to subside, but a pretty attractive area of the marketplace. We think from a relative value perspective, there's some interesting opportunities within the emerging markets. Within the alternatives complex, emerging markets, central banks have been well ahead of the fight on inflation this time. You're seeing a significant yield advantage with the inflation process in some of these markets, actually looks more constructive than in the developed world. So those are some areas that look quite attractive to us as well. Asset-backed CMBS markets on the public side look good for different reasons.

Then within the higher quality structured product markets, motivated sellers of risk, we are even able to acquire big pools of assets and do our own securitizations.

So those are a few of the sectors that we like.

And then for the patient deployer of capital that's managing capacity carefully and not getting stuck in crowded sectors, this is going to be a good vintage for private opportunities.

We really believe that.

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

Text on screen: PIMCO

DISCLOSURE


All investments contain risk. Investing in the bond market is subject to certain risks including market, interest-rate, issuer, credit, and inflation risk. Investments in residential/commercial mortgage loans and commercial real estate debt are subject to risks that include prepayment, delinquency, foreclosure, risks of loss, servicing risks and adverse regulatory developments, which risks may be heightened in the case of non-performing loans. Investments in mortgage and asset-backed securities are highly complex instruments that may be sensitive to changes in interest rates and subject to early repayment risk. References to Agency and non-agency mortgage-backed securities refer to mortgages issued in the United States. Structured products such as collateralized debt obligations are also highly complex instruments, typically involving a high degree of risk; use of these instruments may involve derivative instruments that could lose more than the principal amount invested. 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. Equity investments may decline in value due to both real and perceived general market, economic and industry conditions, while debt investments are subject to credit, interest rate and other risks. Diversification does not ensure against loss.

References, either general or specific, to securities and/or issuers are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities.

The material contains statements of opinion and belief. Any views expressed herein are those of PIMCO as of the date indicated, are based on information available to PIMCO as of such date, and may not have been updated to reflect real time market developments. Statements of opinion are subject to change, without notice, based on market and other conditions. No representation is made or assurance given that such views are correct. PIMCO has no duty or obligation to update the information contained herein.

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 Europe Ltd (Company No. 2604517, 11 Baker Street, London W1U 3AH, United Kingdom) is authorised and regulated by the Financial Conduct Authority (FCA) (12 Endeavour Square, London E20 1JN) in the UK. The services provided by PIMCO Europe Ltd are not available to retail investors, who should not rely on this communication but contact their financial adviser. | PIMCO Europe GmbH (Company No. 192083, Seidlstr. 24-24a, 80335 Munich, Germany), PIMCO Europe GmbH Italian Branch (Company No. 10005170963, Corso Vittorio Emanuele II, 37/Piano 5, 20122 Milano, Italy), PIMCO Europe GmbH Irish Branch (Company No. 909462, 57B Harcourt Street Dublin D02 F721, Ireland), PIMCO Europe GmbH UK Branch (Company No. FC037712, 11 Baker Street, London W1U 3AH, UK), PIMCO Europe GmbH Spanish Branch (N.I.F. W2765338E, Paseo de la Castellana 43, Oficina 05-111, 28046 Madrid, Spain) and PIMCO Europe GmbH French Branch (Company No. 918745621 R.C.S. Paris, 50–52 Boulevard Haussmann, 75009 Paris, France) are authorised and regulated by the German Federal Financial Supervisory Authority (BaFin) (Marie- Curie-Str. 24-28, 60439 Frankfurt am Main) in Germany in accordance with Section 15 of the German Securities Institutions Act (WpIG). The Italian Branch, Irish Branch, UK Branch, Spanish Branch and French Branch are additionally supervised by: (1) Italian Branch: the Commissione Nazionale per le Società e la Borsa (CONSOB) (Giovanni Battista Martini, 3 - 00198 Rome) in accordance with Article 27 of the Italian Consolidated Financial Act; (2) Irish Branch: the Central Bank of Ireland (New Wapping Street, North Wall Quay, Dublin 1 D01 F7X3) in accordance with Regulation 43 of the European Union (Markets in Financial Instruments) Regulations 2017, as amended; (3) UK Branch: the Financial Conduct Authority (FCA) (12 Endeavour Square, London E20 1JN); (4) Spanish Branch: the Comisión Nacional del Mercado de Valores (CNMV) (Edison, 4, 28006 Madrid) in accordance with obligations stipulated in articles 168 and 203 to 224, as well as obligations contained in Tile V, Section I of the Law on the Securities Market (LSM) and in articles 111, 114 and 117 of Royal Decree 217/2008, respectively and (5) French Branch: ACPR/Banque de France (4 Place de Budapest, CS 92459, 75436 Paris Cedex 09) in accordance with Art. 35 of Directive 2014/65/EU on markets in financial instruments and under the surveillance of ACPR and AMF. The services provided by PIMCO Europe GmbH are available only to professional clients as defined in Section 67 para. 2 German Securities Trading Act (WpHG). They are not available to individual investors, who should not rely on this communication. | PIMCO (Schweiz) GmbH (registered in Switzerland, Company No. CH-020.4.038.582-2, Brandschenkestrasse 41 Zurich 8002, Switzerland). The services provided by PIMCO (Schweiz) GmbH are not available to retail investors, who should not rely on this communication but contact their financial adviser. | PIMCO Asia Pte Ltd (8 Marina View, #30-01, Asia Square Tower 1, Singapore 018960, 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 (Suite 2201, 22nd Floor, Two International Finance Centre, No. 8 Finance Street, Central, Hong Kong) 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. Office address: Suite 7204, Shanghai Tower, 479 Lujiazui Ring Road, Pudong, 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. To the extent it involves Pacific Investment Management Co LLC (PIMCO LLC) providing financial services to wholesale clients, PIMCO LLC is exempt from the requirement to hold an Australian financial services licence in respect of financial services provided to wholesale clients in Australia. PIMCO LLC is regulated by the Securities and Exchange Commission under US laws, which differ from Australian laws. | 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, The Investment Trusts Association, Japan and Type II Financial Instruments Firms Association. 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 an independently operated and managed company. The reference number of business license of the company approved by the competent authority is (112) Jin Guan Tou Gu Xin Zi No. 015 . The registered address of the company is 40F., No.68, Sec. 5, Zhongxiao East Rd., Xinyi District, Taipei City 110, Taiwan (R.O.C.), and the telephone number is +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 LLC in the United States and throughout the world. ©2023, PIMCO.

CMR2023-1011-3162533

Gain insights on how investors can adapt to today’s market landscape from a panel discussion at our recent Alternatives Investor Conference.

Unlocking the Power of Alternative Investments

Adapting to the Evolving Credit Landscape

Capitalizing on Change in the Real Estate Market

Decoding Quant Strategies

Featured Participants

Select Your Location

Americas

Asia Pacific

Europe, Middle East & Africa

Back to top