PIMCO Income: Multi-Sector Winner

06/17/2015 9:00 am EST

Focus: FUNDS

Walter Frank


We are adding depth to our multi-sector bond fund list with the addition of a fund that seeks out the best income-generating opportunities in all market climates, from any global sector, explains Walter Frank, editor of MoneyLetter.

PIMCO Income Fund Class D (PONDX) will also shift its portfolio weightings to wherever attractive yields can be generated.

The fund's portfolio is dividend into two sections. One holds high-yielding securities that are expected to have good returns if the economy is growing strongly. And one holds higher-quality obligations that would perform better in a weaker economy.

In both sections of the portfolio, managers seek to exploit relative value opportunities arising from what they believe are securities that are mis-rated by ratings agencies.

Recently, the higher yielding portion of the portfolio has emphasized senior positions in the capital structure, with 46% of assets in mortgage securities, primarily large, quasi-sovereign entities and long-dated Brazilian inflation-linked securities.

In the higher quality section, the managers have focused on developed countries, primarily Australia. Further, US duration hedge-aided results as longer-term interest rates have increased.

Over the long haul, this fund has had outstanding performance. From inception through the end of the first quarter, the fund returned 9.4% annualized .1% for the Barclays US Aggregate.

For the trailing five-year period through May 29, the fund placed in the top 98% of the multi-bond sector category, with a 10.7% return.

PIMCO expects global growth to improve modestly this year, aided by lower oil prices and global central bank stimulus programs; over 20 central banks eased monetary policy in the first quarter.

The fund also focuses on securities with floating rates; currently, over 43% of the fund is invested in such issues. Overall, we consider this fund to be an all-sectors winner.

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