PIMCO's Dynamic Play on Income

12/27/2017 5:00 am EST

Focus: FUNDS

Todd Shaver

Founder and Editor-in-Chief, BullMarket.com

With rising geopolitical tensions and good money been made in the stock market, we stress the importance of increasing your bond allocation; PIMCO Dynamic Income Fund (PDI) is a great way to do it, notes Todd Shaver, editor of Bullmarket.com.

The portfolio maintains moderate exposure to US interest rates, where Pimco continues to emphasize the intermediate portion of the yield curve.

However, due to historically low yield levels and continued flattening of the yield curve, the fund has some exposure to the long end of the US Treasury curve. Outside of the US, Pimco also has modest exposure to UK rates and an underweight to Eurozone rates.

Pimco maintains a focus on non-agency Mortgage-back securities (MBS) purchased at discounts to par, which provide a potential source of income and capital appreciation, as prices in this asset class continue to be supported by limited new supply and a strong US housing market.

Pimco maintains exposure to corporate credit, including an allocation to high yield bonds in the Financial sector. The banking exposure is focused on slightly more risky opportunities that are more lucrative, given how stable the banking system is at this moment.

PIMCO Dynamic Income  has exposure elsewhere in corporate credit, including allocations to select attractive names in Retail, Media, and Telecom.

Pimco’s exposure to emerging markets remains highly selective and is focused on issues offering attractive spread premium and real yields coupled with strong underlying fundamentals, such as select Brazilian and Russian corporates, as well as Argentinian sovereign debt.

Pimco is offering just less than a 9% yield. And the fund is up over 20% this year. For fixed income this is amazing. This fund is a great place to increase your fixed income exposure and protect against unexpected drawdowns in the stock market.

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