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