Why PIMCO Australian Bond is a Gold-rated strategy
Tim Wong explains why PIMCO Australian Bond is Morningstar's most highly rated fixed-interest strategy in this market.
Mentioned: PIMCO Australian Bond Fund (11064)
Tim Wong: PIMCO Australian Bond's highly-reputable and stable team led by Rob Mead shows a level of insight into the Australian fixed interest market that few rivals can match. Mead and his team apply an extremely thorough process for identifying the major factors affecting bond yields and currency markets. They apply these views in a sophisticated fashion when constructing the portfolio. In turn, it's led to extremely rewarding results for investors in this strategy for a sustained period of time.
PIMCO aims to get the big picture calls right. To do so staff gather from around the world to share and debate their views on the global economy and form a perspective to apply across all its portfolios. Its Annual Secular Forum aims to identify the medium to longer-term outlook on key macroeconomic variables such as economic growth and inflation, while its regular Quarterly Cyclical Forum aims to identify shorter-term ideas that have attractive risk-return profiles. Each portfolio manager's decisions on interest rates, credit and currency decisions are influenced by these broader views while the portfolio managers also look to its teams of analysts to identify specific sector and issuer-specific ideas.
PIMCO Australian Bond is managed against the Bloomberg AusBond Composite benchmark. It has reasonable latitude in setting its interest rate duration, though it's typically stayed within plus or minus two years of the benchmark. There's also a meaningful latitude to take active positions on government, corporate credit, inflation-linked bonds as well as securitized investments away from the benchmark. There's scope to invest in high-yield instruments, though exposure there has historically been very limited. This strategy can also invest up to 30 per cent in non-Australian dollar securities which differentiates PIMCO from much of its cohort. Much of this exposure is currency-hedged back to Australian dollars. Importantly, PIMCO has utilized the insights of its colleagues and applied this lever judiciously over a sustained period of time.
PIMCO Australian Bond can act as a core fixed interest allocation. It's a portfolio of high-quality bonds that can act as an effective diversifier to riskier assets such as equities.