Rise Above Rates

Rising Rates and Unconstrained Strategies

Investors may wish to consider dynamic bond strategies that are not dominated by interest rate risk.

Marc Seidner, PIMCO’s CIO Non-traditional Strategies, discusses how unconstrained bond approaches may benefit investors in a rising rate environment.


The predominant risk factor that underpins traditional benchmark-oriented bond portfolios is interest rate risk. While rates remain generationally low, PIMCO believes they will rise modestly over time – an environment conducive to unconstrained-type bond strategies that aren’t tied to benchmark risks.

  • The U.S. is in the midst of a sustainable economic recovery, which should eventually lead to the normalization of shorter-term interest rates. Given PIMCO’s New Neutral view that Fed policy rates will remain lower for longer, we believe this will result in the modest and gentle rise of longer-term interest rates over time.
  • In this environment, an unconstrained bond portfolio – one that draws on a multitude of risk factors for return, rather than just interest rate risk – may benefit investors.

More from PIMCO on Rates

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Rising Rates and Bonds

A short video offering basic education on what the fed funds rate is and how changes in the rate may impact bond investments.

PIMCO’s Outlook for Rates

Even amid a tighter policy environment, interest rates should remain historically low in the years ahead.

Rising Rates: Dispelling the Myth

A reasoned analysis that takes into account historical interest rates, the likely path of rates going forward and the impact of past interest rate rises on returns suggests that rising rates may not be such a threat to bond investors.

The Benefits of Active Management When Rates Are Rising

After nearly seven years of a near zero federal funds rate, investors are concerned about an eventual Fed rate hike and investing in the current environment. We discussed rising rates and the benefits of active management with PIMCO managing director Jim Moore.

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Disclosures

A word about risk: All investments are subject to risk and may lose value

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 suitable 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.

Forecasts, estimates and certain information contained herein are based upon proprietary research and should not be interpreted as investment advice, as an offer or solicitation, nor as the purchase or sale of any financial instrument. Forecasts and estimates have certain inherent limitations, and unlike an actual performance record, do not reflect actual trading, liquidity constraints, fees, and/or other costs. In addition, references to future results should not be construed as an estimate or promise of results that a client portfolio may achieve.

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.