• A liquid, high-quality solution for inflation-adjusted income in retirement.
• Seeks to provide systematic, real monthly distributions until final maturity in 2019.
• Designed to help retirees meet required spending needs.
• Access to PIMCO’s TIPS management expertise.

Systematic, inflation-adjusted retirement income

Retirees aim to protect their spending power for retirements that may last 20 or even 30 years. PIMCO Real Income Fund seeks to convert accumulated savings at retirement into systematic, real (after-inflation) income over a determined time frame. The Fund is structured to provide monthly distributions that combine principal, interest and the rate of inflation, until the Fund reaches its final maturity date, in 2019. (Note: This is not a target-date fund, which has an allocation strategy that changes until a specified retirement date.)

A top-quality orientation

The Fund’s portfolio is made up of mostly U.S. government-issued TIPS (Treasury Inflation-Protected Securities), which automatically adjust to keep pace with inflation. While the Fund’s distributions are not guaranteed, the real interest and timely repayment of principal on the underlying TIPS in the Fund are guaranteed by the U.S. government.

A liquid alternative to annuities

PIMCO Real Income Fund is highly liquid, making it a convenient alternative to annuities, which create disincentives for people to access their money early by imposing high penalties on withdrawals, and which are subject to the credit risk of the underlying insurance company; the Fund’s annual expenses may also be lower. Unlike an annuity, however, the Fund does not offer insurance guarantees, and the value of your principal investment in the Fund will fluctuate.

At the same time, an investor may also choose to complement the Fund with an annuity that begins lifetime payments when the Fund matures. An annuity insurance contract is significantly different in nature than an investment in the Fund, however. Talk to your financial advisor about the differences and whether such an annuity would be appropriate for you.

A reliable source for “must-have” spending needs

The Fund is designed to represent the portion of a retiree’s portfolio devoted to meeting required spending needs not covered by Social Security and defined benefit plans. By providing a baseline of systematic income that preserves purchasing power, the Fund leaves investors free to then tactically add risk elsewhere in their portfolios for less essential needs.

PIMCO’s deep bench of TIPS Expertise

The Fund’s investment process is patent pending, due to its unique strategy and sophisticated methodology. More broadly, PIMCO is the largest TIPS manager and has been managing TIPS portfolios since the securities were first issued in 1997. The firm’s 15-member global Real Return Team provides specialized expertise on inflation-hedging investments. Given its broad reach and execution capabilities in the market, PIMCO may be able to take advantage of certain economies of scale and efficiencies not available to other investment managers and advisors.

The Fund’s investment process begins with PIMCO’s three-to-five year outlook for the global economy and interest rates, formulated at the firm’s annual Secular Forum; it is supplemented by PIMCO’s cyclical outlook, which specifies a near-term forecast. These views help set basic portfolio parameters, including duration, yield curve positioning, sector weightings and credit quality. These “top-down” macro views are then combined with bottom-up input — including credit analysis, quantitative research and individual issue selection — provided by the firm’s experienced sector specialists.

The Fund is designed to provide regular distributions and manage interest rate risk by employing a laddered portfolio of short-, intermediate- and long-term securities. TIPS are subject to interest rate risk, however, meaning that they decline in value when interest rates rise. In a deflationary period, the Funds’ distributions may be lower than Treasuries whose interest and principal are not adjusted for inflation.

Gang Hu is a senior vice president and a member of PIMCO’s global real return team. He holds a Ph.D. in applied mathematics from the California Institute of Technology and an undergraduate degree from Tsinghua University in Beijing.

Newport Beach, California

Led by Founder and Co-Chief Investment Officer Bill Gross, PIMCO is widely recognized as one of the premier bond managers in the world. PIMCO applies this expertise to a range of core and specialized investment portfolios.