- Benefits from PIMCO's proprietary credit research, a key advantage in a municipal bond market that has become increasingly complex and subject to credit risk
- Seeks to improve market access and pricing to provide best execution based on institutional presence
- Designed to generate an attractive, predictable stream of income with an emphasis on capital preservation; PIMCO's national ladders are exempt from federal taxes while the California ladders are exempt from federal and, in most cases, California income taxes
- Minimum average portfolio rating of A+ (by either S&P or Moody's)
- No exposure to issues subject to the alternative minimum tax (AMT) at time of purchase
Process & Philosophy
Municipal Bond Philosophy
PIMCO focuses on generating tax-efficient income and capital preservation by investing in high quality municipal bonds that are exempt from federal taxes. (In most cases, the California ladders are also exempt from California income taxes.) We seek well-structured municipal bonds that provide appropriate compensation for risks relating to calls, credit quality, liquidity, tax liabilities and market supply-demand conditions.
As with all of our strategies, PIMCO Municipal Bond Ladders for Managed Accounts is guided by our top-down global macroeconomic outlook. Rigorous bottom-up analysis drives the municipal bond selection process and facilitates the identification and analysis of undervalued securities.
PIMCO has been managing municipal assets since 1997 and we are among the largest investors in the space today – our size and breadth in this sector may provide economies of scale benefits for investors, such as pricing and transaction cost advantages.
Our laddered portfolios seek to diversify sector and issuer exposure and are constructed using high quality municipal bonds whose maturities are staggered from one to six, 12 or 18 years – ranges chosen specifically in an effort to add value. For example, the PIMCO 1–6 Year National Municipal Bond Ladder includes a sixth year because most short-term municipal investors buy out to five years. Through this modest extension of duration, we aim to capture the pickup in yield that typically arises from lower demand for six-year issues. Similarly, our 1–12 Year National and California Ladders have the potential to benefit from reduced investor demand for maturities beyond 10 years, and our 1–18 year ladders may provide similar yields to 20-year ladders with lower interest rate risk. Additionally, the portfolio will not invest in municipal bonds subject to the alternative minimum tax (AMT).