Webinar: Navigating fixed income markets with PIMCO
Endowus Insights

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Webinar: Navigating fixed income markets with PIMCO

Jun 2022
Jun 2020
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Endowus and PIMCO, one of our key fund management partners, discuss an overview of the global macroeconomic environment and credit markets, as well as updates on the PIMCO funds in the Endowus portfolios.

00:00 Introduction

2:30 Introduction to Endowus

11:18 Introduction to PIMCO

19:30 Economic Outlook by PIMCO

25:39 Brief on PIMCO funds

28:40 QnA

53:56 Opportunities in emerging markets

1:04:00 QnA

Extracted QnA answered by our PIMCO guests speakers

Q: The equity markets have rebounded sharply. Has the Fed central banks policies removed bulk of the risks associated with the Fixed Income markets?

PIMCO: We agree that there is a sharp rebound in the equities market but we observe that the fixed income market has seen price rebound. We believe there is more opportunities in fixed incomes. Bond spread is still at the wide relative to pre-crisis drawdown. The Fed has supported high quality corporate and investment grade bond prices by purchasing of bonds, but for high yield there is an opportunity and risk because the Fed has not supported those.

Q: What are PIMCO's view on impact of negative interest rates, inflation and the strength of USD moving forward?

PIMCO: We feel that the Fed will not drive interest rate to the negative rates level because negative interest rates are not proven to work in supporting the economy. The Fed has shown that they have other instruments to support the economy.

We think that we would be in a deflationary environment without the monetary policies and quantitative easing policies due to the supply and demand shock. Consumer and industrial production has been disrupted greatly by the current crisis. Hence inflation is not a key concern now.

We also do not have a strong view of any currency relative to USD. We believe the FX movements have a huge impact on the returns on the fund, so we take minimal FX positions in our funds.

Q: Why does PIMCO espouse active investing over passive investing for fixed income?

PIMCO: Fixed income indices make less sense because weightage in indexes are often done based on the market value of the equities or debt raised in fixed income this is counter-intuitive because we are effectively lending more money to companies or entities that are more indebted, and less money to companies or entities that are less indebted.

Passive bond funds also have their investment mandates around ratings agencies and there are many companies that are borderline cases that should or should not be owned. Having an active view on that and over and underweighing on certain companies can bring in additional returns.

There may also be mispricing of bonds issued by the same company and entity, despite having similar credit risk. This could be due to passive bond investment mandates. The ability to negotiate with the companies for better deals with the bond issuing companies also help to us outperform.

We also are not forced to sell or buy bonds when index composition changes, that helps us keep costs low and outperform.

Investment involves risk. Past performance is not necessarily a guide to future performance or returns. The value of investments and the income from them can go down as well as up, and you may not get the full amount you invested. Rates of exchange may cause the value of investments to go up or down. Individual stock performance does not represent the return of a fund.

Any forward-looking statements, prediction, projection or forecast on the economy, stock market, bond market or economic trends of the markets contained in this material are subject to market influences and contingent upon matters outside the control of Endow.us Pte. Ltd (“Endowus”) and therefore may not be realised in the future. Further, any opinion or estimate is made on a general basis and subject to change without notice. In presenting the information above, none of Endowus Pte. Ltd., its affiliates, directors, employees, representatives or agents have given any consideration to, nor have made any investigation of the objective, financial situation or particular need of any user, reader, any specific person or group of persons. Therefore, no representation is made as to the completeness and adequacy of the information to make an informed decision. You should carefully consider (i) whether any investment views and products/ services are appropriate in view of your investment experience, objectives, financial resources and relevant circumstances. You may also wish to seek financial advice through a financial advisor or the Endowus platform and independent legal, accounting, regulatory or tax advice, as appropriate.

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