Fund Rationale: PIMCO Global Real Return Fund

PIMCO Global Real Return Fund
SGD Hedged Institutional Class Accumulation Shares (ISIN: IE00B29WLV81)
Fund Manager Page

Introductory information
The PIMCO Global Real Return Fund (the "Fund”) is an actively managed portfolio of primarily intermediate duration, global inflation-linked bonds issued by governments, their agencies or instrumentalities and corporations (at least two thirds of the Fund’s assets). The Fund may also have limited tactical holdings, including nominal government, mortgage, corporate or money market securities. This Fund seeks to offer a hedge against inflation, consistent real returns, low volatility, portfolio diversification and a broad opportunity set.

The Fund is benchmarked against the Bloomberg Barclays World Government Inflation-Linked Bond Index, and is suitable for investors who are looking to maximise total return through a combination of both income and capital growth, are seeking a protection against inflation rates, are looking for a diversified exposure to global fixed income markets and are willing to accept the risks and volatility associated with investing in such markets, and have an investment horizon over the medium to long term.

The inception date of the oldest share class of the Fund is 30 September  2003, while the SGD Hedged Institutional Accumulation shares were incepted on 29 February 2008. As of September 2020, the Fund managed a total asset of SGD 2.8bn.

 

Characteristics
The Fund invests primarily in investment grade Fixed Income Instruments, but may invest up to 10% of its assets in Fixed Income Instruments that are rated lower than Baa by Moody's or lower than BBB by S&P or equivalently rated by Fitch, but rated at least B by Moody's or S&P or equivalently rated by Fitch (or, if unrated, determined by the Investment Advisor to be of comparable quality). The Fund may hold both non-USD denominated Fixed Income Instruments and non-USD denominated currency positions. Non-USD denominated currency exposure is limited to 20% of total assets.

The Fund will utilise a global inflation-linked bond strategy that seeks to deploy the Investment Advisor's total return investment process and philosophy. Top-down and bottom-up strategies are used to identify multiple sources of value to generate consistent returns.

As of August 2020, the Fund has an effective duration of 12.94 Yrs, and an effective maturity of 13.94 Yrs. Geographically, it has its top allocations to the United Kingdom, the United States, and Europe. In terms of sectors, it has 72.92% to government related bonds, 15.54% to securitised assets, and 7.55% to investment grade credit.

 

Background information and cost
The Fund has a unified all-in management fee of 49bps per annum (0.49% p.a.). Endowus provide their clients access to its institutional Share Class, which is a clean share class with no trailer fees. Endowus do not charge a preliminary sales charge or any other fees, other than the all-in advice fee.

PIMCO are one of the world’s premier fixed income investment managers. Since their founding in 1971 in California, they have continued to bring innovation and expertise to their partnership with clients seeking the best investment solutions. Today PIMCO’s professionals work in 17 offices across the globe, united by a single purpose: creating opportunities for investors in every environment.

 

Selection criteria for Endowus
Endowus have selected the PIMCO Global Real Return Fund for its diversified exposure, experienced management and robust execution, and its competitive price. With the access to the Fund’s low-cost institutional share class offered by Endowus, it is competitively priced even against its passive peers, As a result, investors can be exposed to a better-executed portfolio of diversified global inflation protected securities. Despite some noteworthy team turnover in late 2019, the strategy remain in capable hand. - its current management team includes Lorenzo Pagani, formerly Head of the European rates trading desk and now overseas the ex-US inflation-lined effort while PIMCO veteran Steve Rodosky, who led the firm's U.S. Treasury trading desk in earlier years, contributes to this portfolio's U.S. positioning. The team is rounded off by former agency mortgage specialist Daniel He, who joined the inflation-linked desk in early 2019 to support Rodosky.

An important tool that the strategy has at its disposal is to invest beyond the benchmark and the Fund has benefited from the flexibility of investing up to one third of its assets in other sectors, which leverages from the insights of PIMCO’s broad, deep bench of global bond experts. The managers who remain on this strategy following Mihir Worah's (previous manager) departure have a limited track record here. But because the current managers follow a similar process and rely on the same resources, we believe its performance under Worah demonstrates the strategy’s long-term potential. 

Updated by Endowus: 25 Sept 2020

** Disclaimer
Past performance should not be taken as an indication or guarantee of future performance and no representation or warranty, express or implied, is made regarding future performance. Any opinions expressed reflect a judgment at the original date of publication by us and are subject to change without notice.

The prospectus, profile statement, product highlight sheet, fund factsheet or other offer or product documents may contain references about the expected risk tolerance of their target investors. These are in no way indicative of how we at Endowus have assessed your risk tolerance based on your stated objectives and financial situation. Endowus accepts no responsibility for investment decisions made in response to the expected risk tolerance levels mentioned in the product or offer documents.