PIMCO Investments LLC
Managed Accounts
Managed Accounts

PIMCO Municipal Bonds

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Strategy Overview

Highlights

  • A risk-focused, actively managed portfolio that aims to deliver quality, tax-efficient returns by investing in municipal bonds that are exempt from Federal taxes and the alternative minimum tax (AMT) at time of purchase. Municipal bonds may be subject to State and local taxes.

  • Managed by an expert municipal team led by Joe Deane, a market veteran with more than four decades of experience, and supported by one of the industry's leading credit research teams.

  • The strategy seeks to take advantage of PIMCO's substantial market presence, which may result in economies of scale and greater, more efficient access to opportunities.

  • Use of a PIMCO managed commingled fund within the portfolio offers a number of potential advantages, including greater flexibility and diversification, and improved hedging and risk management capabilities.

 

Process & Philosophy

Municipal Bond Philosophy

All of PIMCO's municipal bond strategies rely on our core competency in fixed income management, with the objective of maximizing tax-advantaged income while emphasizing capital preservation. PIMCO has been managing municipal assets since 1997 and we are among the largest investors in the space today with $58 billion AUM as of 31 July 2012. Our 14-member municipal team is headed by Joe Deane, a municipal market veteran with more than four decades of investment experience. Critically, our team of six dedicated municipal analysts taps into the expertise of more than 40 firm-wide credit analysts. Together, they continually monitor the credits we purchase, with the aim of guarding portfolios from the adverse impact of a negative credit event.


Investment Process

Our investment process utilizes both "top-down" and "bottom-up" strategies. Top-down strategies are deployed from a macro view of the portfolio driven by our secular outlook of the forces likely to influence the economy and financial markets over the next three to five years and our cyclical views of two- to four-quarter trends. Implementation in portfolios is effected by selecting securities that achieve the designated objectives. The municipal team views this framework through the lens of tax-exempt investing, integrating bottom-up research to select individual securities for managed account portfolios.


Portfolio Construction

PIMCO Municipal Bond managed account portfolios are constructed with two components: a core segment of individual bonds that act as a foundation; and a commingled vehicle built to complement these holdings. The core segment represents approximately 70% of the overall portfolio and focuses on high quality individual municipal bonds. The commingled vehicle makes up the balance of the portfolio and provides access to specialized investment strategies. This innovative structure allows individual accounts the flexibility to pursue a broader range of tax-advantaged, risk-return opportunities.

Managers

Joseph Deane

Mr. Deane is an executive vice president in the New York office and head of municipal bond portfolio management. Prior to joining PIMCO in 2011, he was co-head of the tax-exempt department at Western Asset (WAMCO). Mr. Deane was previously a managing director and head of tax-exempt investments from 1993-2005 at Smith Barney/Citigroup Asset Management. Earlier in his career, he held senior portfolio management positions with Shearson and E.F. Hutton. Morningstar named him Fixed-Income Manager of the Year in 1996 and a finalist in 1995 and 2007. He has 43 years of investment experience and holds a bachelor's degree from Iona College.

Julie P. Callahan, CFA

Ms. Callahan is a senior vice president and municipal bond portfolio manager in the New York office. Prior to joining PIMCO in 2011, she was a portfolio manager for municipal separately managed accounts at Western Asset (WAMCO). She previously managed the firm's municipal money market funds. Before that, Ms. Callahan was director and portfolio manager for municipal money market funds with Citigroup Asset Management. She has 18 years of investment experience and holds a bachelor's degree from Fairfield University.

The managed account strategies described in this material are offered by Pacific Investment Management Company LLC and are available exclusively through financial professionals. Managed accounts have a minimum asset level and may not be suitable for all investors. Financial professionals seeking more information should contact their managed accounts department or call their PIMCO representative.

The Managed Accounts strategy consists of individual securities and a select combination of proprietary, commingled vehicles. These vehicles are available only through managed accounts utilizing the Managed Accounts strategy and are available by prospectus only.

Past performance is not a guarantee or a reliable indicator of future results. Individual account holdings will vary depending on the size of an account, cash flows and account restrictions. Portfolio holdings are subject to change daily without notice. At any time an individual account managed in this strategy may or may not include securities held by another portfolio. Consequently, any particular account may have portfolio characteristics and performance that differ from another individual account in this strategy.

A word about risk:
Investing in the bond market is subject to certain risks including market, interest-rate, issuer, credit, and inflation risk; investments may be worth more or less than the original cost when redeemed. Income from municipal bonds may be subject to state and local taxes and at times the alternative minimum tax; a strategy concentrating in a single or limited number of states is subject to greater risk of adverse economic conditions and regulatory changes. Derivatives may involve certain costs and risks such as liquidity, interest rate, market, credit, management and the risk that a position could not be closed when most advantageous. Investing in derivatives could lose more than the amount invested. Diversification does not ensure against loss.

The value of most bond funds and fixed income securities are impacted by changes in interest rates. Bonds and bond funds with longer durations tend to be more sensitive and more volatile than securities with shorter durations; bond prices generally fall as interest rates rise.

The Barclays 1-10 Year Municipal Bond Index is an unmanaged index considered to be generally representative of investment-grade municipal issues having remaining maturities from 1-10 years and a national scope. It is not possible to invest directly in an unmanaged index.

This material contains the current opinions of the manager and such opinions are subject to change without notice. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.

No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. Pacific Investment Management Company LLC, 650 Newport Center Drive, Newport Beach, CA 92660, 800-387-4626. ©2015, PIMCO