Pimco expands income funds

Pimco has announced further expansion of its equity strategies this morning, while also launching a UK income bond fund

The moves by the $1.2trn fixed income specialist come as part of a range of initiatives by Allianz Global Investors, of which Pimco is part.

Pimco has entrusted management of its Select UK Income Bond fund to Mike Amey, managing director and portfolio manager responsible for sterling portfolios.

Andrew Balls, Pimco’s head of portfolio management for Europe, said Pimco would also add an emerging markets equity strategy to its existing value equity program.

Separately, AGI is planning a suite of products based on work from its one-year old Centre for Behavioural Finance.

Balls said of emerging markets generally: “We see a multi-speed world with clear differentiation between emerging markets countries and developed countries”.

The difference could largely be explained by initial conditions regions were in entering the crisis, “with emerging markets less exposed to the cycles of leverage and deleverage”.

Balls said inflation, particularly for commodities and food prices, was a key risk in developing economies, “but at the same time policy stances in OECD nations still remain focused on risks to growth and demand-growth”.

He doubted OECD economies’ public sector consumption would fill the void left as private purses suffered at the hands of austerity packages.

A slew of advanced economies are implementing such packages to bring public borrowing under control, to avoid unwanted attention from bond markets.

Balls said G20 nations had to effect fiscal consolidation, on average, by 8.8% this decade to stabilize public debt at 60% of GDP. Japan, Ireland and Greece needed to conduct about twice this level of consolidation for the same debt-to-GDP ratio.

Joachim Faber, AGI’s chief executive, said India and China were key markets for the group in terms of selling product as well as investing in markets.

Separately, Marna Whittington, AGI’s chief operating officer, said AGI would launch products this year based on research from its San Diego-based Centre for Behavioural Finance. The centre boasts a six-strong advisory board headed by Schlomo Benartzi, professor and co-chair of the behavioral decision-making group at UCLA’s Anderson School of Management.

Meanwhile, Mike Amey’s income bond fund, part of Pimco’s Select Ucits III fund range, has been launched to help yield-seeking investors get better risk-adjusted returns than sovereigns, cash and equity funds offer.

Amey said UK growth would remain subdued “for a number of years”, and the Bank of England would keep interest rates low. “In such an environment, there is a greater need to identify alternative sources of income through ‘safe’ higher yielding assets,” he said.

Amey’s fund will target high quality fixed income issues to make 5% distributions annually.

David Walker

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