- Focuses on high quality shorter-term bonds, which provide broad market exposure while maintaining a lower sensitivity to interest rate movements
- Duration range of 0 to 3 years may offer a yield advantage over short-term bond strategies
- Employs a variety of value-added strategies in an effort to generate excess returns and effectively manage risk
- Use of PIMCO-managed commingled fund allows for greater diversification potential than smaller separate accounts could otherwise achieve
- Emphasizes total return, an approach pioneered at PIMCO over 40 years ago that seeks returns through both income and capital appreciation
Process & Philosophy
Low Duration Philosophy
Low Duration Managed Accounts portfolios offer the advantage of a core bond investment – delivering broad market exposure – while emphasizing shorter-term securities. With a duration range between 0–3 years, the strategy typically offers a yield advantage over more conservative short-duration fixed income vehicles (money market funds, for example) by capitalizing on a wider opportunity set in order to generate excess returns. Moreover, while more volatile than money market funds, the focus on shorter-duration securities will result in less interest rate risk and lower volatility versus traditional long- and intermediate-term core bond funds.
The strategy employs a total return approach, seeking both income and capital appreciation to generate returns. PIMCO pioneered this philosophy more than 40 years ago and it has been a critical component to the firm’s long-term performance record.
PIMCO is committed to active bond management utilizing a long-term framework, with a focus on delivering alpha (excess returns) over the market cycle. Through its annual Secular Forum, the firm develops a 3–5 year outlook for the global economy, inflation and interest rates, which provides the guardrails for our long-term portfolio construction and positioning. Through our quarterly Cyclical Forums we refine these inputs to help set the near-term portfolio strategy. We combine this macro investment process with rigorous bottom-up analysis, utilizing advanced proprietary tools and the firm’s expertise and presence across global fixed income markets to drive the security selection process. The objective is to combine perspectives from both the portfolio and security level to consistently add value over time with acceptable levels of portfolio risk.
PIMCO Low Duration managed account portfolios are comprised of two distinct components: a core segment of individual bonds that provide a foundation, complemented by one or more PIMCO-managed, sector-oriented commingled vehicles. The core segment represents approximately 55%–60% of the overall portfolio and focuses on primarily investment grade fixed income securities and related derivatives. The commingled component comprises 40%–45% of the portfolio and invests in a wide variety of shorter-term fixed income securities and related derivatives. This innovative structure allows managed account portfolios to model PIMCO’s Low Duration strategy by providing the flexibility to invest across all sectors of the bond market on a cost-effective basis.