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Active, tactical style delivers returns for A Grade PIMCO Monthly Income Fund
7/18/2018 4:50:53 AM
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Objective research, analysis, and insight on investment funds in Canada from an acknowledged industry expert

By Dave Paterson  | Wednesday, August 30, 2017



The actively managed PIMCO Monthly Income Fund is a global bond fund with a decided focus on income generation, paying attention to protecting invested capital. The managers have a lot of tools at their disposal and can invest in a wide range of fixed-income securities, including mortgage backed securities, investment grade bonds, high yield debt, and emerging market bonds. Since inception in 2011, the fund has garnered three annual FundGrade A+® Awards and currently maintains a FundGrade™ A Grade for July. Here’s a look at what makes this fund a standout.

At the end of June, government issues made up more than 34% of the portfolio, followed by mortgage-backed investments, which were just under a quarter of the fund, and a 20% weight in emerging market debt. It also held a mix of high-yield and investment grade credits.

The duration is very defensive, at 2.98 years, which is significantly shorter than the broader Canadian bond market’s duration of 7.4 years.

Managers Alfred Murata and Daniel Ivascyn use a process that is a mix of top-down macro analysis and bottom-up security selection. The macro analysis looks at the long-term outlook and the near-term cyclical view. This helps set the sector mix, duration, and yield curve positioning. Securities are chosen using a fundamentally-driven, bottom-up process.

The managers look at the portfolio in two distinct parts: high quality core, and non-core. Within the high-quality core portion, they focus on investment grade issues in developed countries and agency mortgage backed securities. This portion is designed to provide down-side protections and modest returns in periods when economic growth is weak. The non-core portion, which targets growth, holds lesser-quality issues such as high-yield bonds, emerging market debt, and non-agency mortgage backed securities.

As of July 31, the fund is ahead 5.2% year to date, handily outpacing the index and its peer group. This fund has the potential to deliver excellent risk-adjusted returns when compared with its peers. With its very active, tactical approach, I believe it can outperform as we enter a more challenging environment for fixed-income investments. While not a core holding, it can be a great addition to a diversified fixed-income sleeve.

PIMCO Monthly Income Fund
Fund company
: PIMCO Canada
Fund type:
Global Fixed Income
FundGrade Rating: A
FundGrade A+ Awards: 2103, 2014, 2015
Style: Tactical
Risk level: Low to Medium
Load status: Optional
RRSP/RRIF suitability: Good
Managers: Alfred Murata since Jan 2011; Daniel Ivascyn since Jan 2011
MER: 1.39%
Fund code: PMO005 (front end load)
Minimum initial investment: $500

Dave Paterson, CFA, is the Director of Research, Investment Funds for D.A. Paterson & Associates Inc., a consulting firm specializing in providing research and due diligence on a variety of investment products. He is also the publisher of Dave Paterson’s Top Funds Report, offering regular commentary and in-depth analysis of Canada’s top investment funds. He uses a unique analytical approach to identify funds with strong, risk-adjusted returns, and regularly publishes his insights and analyses in Fund Library.

Notes and Disclaimer

© 2017 by Fund Library. All rights reserved. Reproduction in whole or in part by any means without prior written permission is prohibited.

Commissions, trailing commissions, management fees and expenses all may be associated with fund investments. Please read the simplified prospectus before investing. Mutual funds are not guaranteed and are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer. There can be no assurances that the fund will be able to maintain its net asset value per security at a constant amount or that the full amount of your investment in the fund will be returned to you. Fund values change frequently and past performance may not be repeated. No guarantee of performance is made or implied. This article is for information purposes only and is not intended as personalized investment advice.


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