Click here for a related article: Paul Reisz Discusses PIMCO Income Fund

Generating a high level of current income is often a primary goal for investors who are retired or approaching retirement. In addition to focusing on long-term gains for a portion of their asset allocation, these investors are looking to preserve their savings and generate reliable, steady income from their assets.

To help these investors potentially meet their unique financial goals, PIMCO has launched PIMCO Income Fund, which takes a multi-sector approach to investing in fixed income securities that seeks to capture a high level of yield. The strategy’s primary investment objective seeks to maximize current income by investing in an array of fixed-income sectors, and by employing income-efficient investment strategies. The Fund pursues long-term capital appreciation as a secondary objective.

As the baby-boomers begin to retire, many are looking for investment products that can turn their savings into retirement income. PIMCO Income Fund is an intermediate-term bond portfolio that aims to meet this need by investing in a broad opportunity set of global fixed income sectors, including mortgage-backed securities, U.S. Treasury bonds and corporate bonds – both investment grade and high yield securities (“junk bonds”).

PIMCO Income Fund pursues its objective by investing in multiple areas of the global bond market and employing PIMCO’s analytical capabilities and sector expertise. While PIMCO Income Fund should provide an attractive income stream for investors, it has an intermediate bond duration and exposure which can cause potential volatility in performance.

How does the fund seek to generate income?
The new fund employs many of the same investment strategies as PIMCO’s other portfolios, such as Total Return and Low Duration, and reflects the macroeconomic and asset allocation views of PIMCO’s Investment Committee.

However, PIMCO Income Fund also utilizes unique investment strategies in an effort to help maximize income. PIMCO Income Fund seeks to utilize a broad opportunity set of securities including high yield securities; investment grade corporate bonds of issuers located in the United States and non-U.S. countries; fixed income securities issued by U.S. and non-U.S. governments, their agencies and instrumentalities; mortgage-related and other asset backed securities; and foreign currencies.

While the primary aim of PIMCO Income Fund is to generate high current income, long-term capital appreciation is a secondary goal. PIMCO manages the fund to include our best total return strategies in an effort to help generate capital appreciation and thus provide above-market returns.

How is this fund different from other income-oriented bond funds?
PIMCO Income Fund plans to invest in a very broad opportunity set, targeting a portfolio with:

• Exposure to sectors across the global bond market that offer attractive income potential;
• A level of dividend income that is stable, high, and consistent;
• Higher average credit quality than other income-oriented products as we place a limitation on how much of the fund can be invested in below-investment grade securities in order to seek quality sources of income;
• An intermediate average portfolio duration to emphasize income while also considering capital appreciation; and
• Low correlation with the overall bond market.

To create this multi-sector, high quality portfolio, PIMCO employs a powerful combination of proprietary risk analytics and depth and breadth of fixed income expertise.

Why is the fund’s ability to invest across fixed-income sectors so important?
The global economic landscape is constantly changing, causing different bond sectors to go in and out of favor. The Fund’s multi-sector approach allows it to seek a broad range of income-generating opportunities in any given market climate while managing overall portfolio risk. In addition, having a multi-sector approach can potentially result in a low correlation to the overall bond market and other asset classes. These low correlations provide the potential for PIMCO Income Fund to be a good diversifier and performance enhancer.

How does the fund draw on PIMCO’s strengths?
PIMCO Income Fund seeks to capitalize on PIMCO’s deep portfolio management experience, as well as our expertise in the global bond markets.

PIMCO has managed several portfolios with the aim of maximizing income, and we apply many of the same techniques we have developed for these portfolios to PIMCO Income Fund. In pursuing the fund’s secondary goal of capital appreciation, we draw on PIMCO’s extensive experience in total return investing, which began with the launch of our  total return strategy in 1975.

As a multisector fixed income portfolio, PIMCO Income Fund relies on PIMCO’s breadth and depth across all sectors of the fixed-income market. As one of the largest fixed income managers in the world, we have specialized portfolio managers and fixed-income analysts in nine offices around the globe.

PIMCO Income Fund also stands to benefit from the same macro themes PIMCO develops for our other core fixed-income products and from our top-notch risk management capabilities.

What type of investors might be interested in the fund?
PIMCO Income Fund may be an attractive option for income-oriented investors—such as those planning for retirement—who seek a bond investment with the potential for a relatively high and consistent income stream and an emphasis on risk management. Because the Fund’s multisector approach gives it the flexibility to adapt to changing economic conditions, it may be a good choice for a long-term income allocation. Of course, the fund entails additional risks, and therefore should be considered as a complement to an investor’s core bond holdings.

Conclusion
PIMCO created PIMCO Income Fund to meet investors’ growing need for income. The fund is designed foremost to generate consistent, high income by investing broadly in the fixed-income market and by utilizing several techniques that aim to maximize income. Capital appreciation is a secondary goal. PIMCO Income Fund draws on PIMCO’s expertise in both portfolio management and the fixed-income market.