Invest Like a Fund Manager - PIMCO

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In this edition of Invest like a Fund Manager, we take a look at PIMCO (Pacific Investment Management Company). 

PIMCO is one of the largest investment managers, actively managing over $2.2 trillion in assets with over 2,800 employees in 17 offices globally. The asset-manager manages investments across a broad spectrum of asset classes, strategies, and instruments: fixed income, equities, commodities, asset allocation, ETFs, hedge funds, and private equity.

PIMCO is largely known for its income funds and fixed income securities. For several years, the funds have dabbled into higher-income (and potentially riskier) securities such as high-yield bonds, nonagency mortgages, and derivatives. PIMCO monthly income fund (Canada), for example, invests in the following sectors across a timeline, returning a yield of ~3.5%:

While investors have been interested in PIMCO funds for yield, we are interested in the overall equity exposure of the overall management company. With the strong focus on fixed income instruments, it is interesting to note the equity holdings used to support or hedge returns and risk.

Public Investments (Top 30 holdings)

Source: Refinitiv Eikon. As of February 8, 2020

Sector Breakdown

 

Source: Refinitiv Eikon. As of February 8, 2020

According to Refinitiv Eikon, PIMCO manages over $19 billion in equity assets, with over 2,600 securities held. Out of which nearly $10.7 billion (56.5%) are held from traditional industries (vs equity derivatives or complex securities). Interestingly, while not surprisingly, PIMCO mirrors its appetite for yield onto its equity holdings as well by outweighing financials compared to other sectors. PIMCO holds over 26% of Nationwide Building Society, a British mutual financial institution, and the seventh-largest cooperative financial institution. Sector-wise, consumer cyclicals come in next with REITs (VICI properties, Equinix, Sun Communities), and semiconductors (NVIDIA) amongst other sub-industries. It is interesting to note that energy and utilities account for less than 2%, each, despite being the sectors known for yields. Predictably, technology accounts for less than 5% of exposure.

Regional Breakdown

Source: Refinitiv Eikon. As of February 8, 2020 

Recent Activity

 

Source: Refinitiv Eikon. As of February 8, 2020

The uncertainty that prevailed in the market throughout 2020 and the so-called ‘death’ of 60-40 portfolio, coupled with low yields made investors steer away from fixed-income securities. PIMCO, on the other hand, has largely built a majority of its asset-base based on yield-searchers. With bonds trading at low yields and an unfavorable and uncertain yield market, PIMCO has in the past and continues to invest in diverse products. As such, the equity holdings take a more hedged or safer position in a portfolio. Looking at the portfolio or studying it is a great way to get started for those investors that are looking for yield, but not at the expense of capital loss.

Happy Investing!

Barkha's Signature

 

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Disclosure: Authors, directors, partners and/or officers of 5i Research or related companies have a financial or other interest in AAPL, NVDA, SEDG at the time of publishing