| Fund Company | PIMCO Canada |
| Fund Type | Global Fixed Income |
| Rating | $$$ |
| Style | Tactical |
| Risk Level | Low – medium |
| Load Status | Optional |
| RRSP/RRIF Suitability | Good |
| TFSA Suitability | Good |
| Manager | Dan Ivascyn since January 2011 Alfred Murata since January 2011 |
| MER | 1.38% |
| Code | PMO 005 – Front End Units PMO 105 – Low Load Units |
| Minimum Investment | $1,000 |
Analysis: Since breaking away from the Pacific Life Insurance Company in 1971, PIMCO and its Chief Investment Officer Bill Gross, has become one of the recognized leaders in the global fixed income investing space. While the firm has a long track record, they are relatively new in Canada, arriving here in 2004, providing institutional and private wealth management services. In January 2011, they launched a family of mutual funds in the Canadian market.
One of those funds is the PIMCO Monthly Income Fund, a tactically managed global fixed income fund that looks to generate a high and consistent stream of income for investors. In the past year, the fund has paid monthly distributions to investors that have ranged between $0.041 and $0.046 per unit, equating to an annualized yield of approximately 3.85%.
The fund is managed using PIMCO’s proven investment philosophy and process that uses a mix of top down and bottom up analysis to build the portfolio. The top down macro view is used to set the funds duration, yield curve positioning and sector exposure, while the bottom up research looks to identify the most attractive non Canadian securities that meet the funds broader asset mix.
Performance has blown the competition out of the water and done so with very little volatility. Its one year return was 14.0%, nearly doubling the benchmark BoA ML Global Bond Market Index return of 7.6%.
It is conservatively positioned at the moment, holding 54% in Government bonds, 22% in mortgage backed securities and 10% in emerging market debt. It has a low duration of 3.8 years, meaning it won’t be hit as hard as a traditional bond fund when interest rates move up.
While returns to date have been strong, we believe that the fund has the potential to be much more volatile than it has been. This is because the fund can engage in a number of non traditional strategies including investing up to 50% of the fund in high yield bonds, investing in credit default swaps, it can invest up to 10% of the fund in gold or silver bullion, and it may also invest in leveraged and inverse ETFs.
We are initiating coverage of this fund with a $$$ rating. The only thing preventing us from giving it a $$$$ rating is that it only has a year and a half of track record in Canada, which dampens our enthusiasm a touch.