The top-down investment process begins with PIMCO’s annual Secular Forum, during which the firm develops a three- to five-year outlook for the global economy and interest rates. This helps set the basic portfolio parameters, including duration, yield-curve positioning, sector weightings, credit quality breakdown and individual issue selection. The Fund will normally focus on corporate debt obligations rated in the lowest investment-grade category (Baa or BBB) and in the highest non-investment-grade category (Ba or BB). The portfolio manager attempts to identify investments that provide high current income through fundamental research, driven by independent credit analysis and proprietary analytical tools. However, consideration of yield is only one component of the portfolio manager’s approach; PIMCO also emphasizes issues with capital appreciation potential. The Fund seeks to diversify its holdings across multiple industries and sectors, while focusing on intermediate-maturity bonds to ensure that performance is driven by credit characteristics, not interest rate risk.
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