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For almost 50 years, PIMCO has played a central role in helping investors worldwide pursue their financial objectives, using an active management approach in fixed income to navigate evolving market conditions.
With more than two decades of dedicated Asia and emerging markets fixed income experience, PIMCO combines its global investment process and local expertise to generate investment ideas across Asia fixed income markets. One area that sets PIMCO apart in the Asia-Pacific (APAC) region, as elsewhere, is its internal research capabilities.
Proprietary ratings, seasoned expertise
PIMCO’s Asia credit team is among the largest and most experienced in the region. It comprises 20+ portfolio managers, credit analysts, economists and traders located in and dedicated to the APAC region, with an average of 13 years of investment experience. Together they provide analysis and recommendations for both the Asia and global portfolio management teams, and draw on PIMCO’s global credit and emerging markets expertise for Asia-focused portfolios.
PIMCO is able to use its expertise and relationships in Asia to develop an in-depth and independent judgement of the quality and relative value of each company it invests in. The credit research team conducts all of its own analysis and bottom-up research on industry and company fundamentals (see also Part 2 of this series). The research team assigns internal PIMCO credit ratings on the bonds they study, and makes a recommendation on each issuer, which portfolio managers consider alongside the firm’s macroeconomic outlook, relative value analysis, and mandate objectives to position portfolios to best meet client needs.
PIMCO’s credit research team independently rates approximately 4,000 corporate issuers across the globe, and roughly one-third of internal PIMCO ratings differ from those of external rating agencies. Without needing to only rely on ratings by third parties, which often may be backward-looking and slower in implementing changes, PIMCO uses its forward-looking credit analysis and research process to help find potential upgrades and downgrades ahead of the market, gaining a crucial edge. Furthermore, PIMCO leverages the size of its global credit platform to seek to drive value through new issues and reverse inquires.
PIMCO believes the size of its global credit platform offers many advantages. As one of the largest active fixed income managers, PIMCO can often invest more in talented investment professionals, broader market coverage, in-house research, and risk management systems than smaller investment managers.
Selectivity breeds success
Having a large and sophisticated research team has enabled PIMCO to add unique value in the Asia fixed income space. For example, PIMCO has managed a dedicated Asia High Yield Strategy since 2010. By following a selective approach, maintaining exposure to only 30%–40% of issuers in the index, PIMCO’s Asia High Yield Strategy focuses on the most compelling sectors and companies within the Asia high yield market, seeking to maximize long-term risk-adjusted total return instead of stretching for yield.
Another example is the recently launched PIMCO Asia Strategic Interest Bond Strategy, which focuses on generating income and long-term capital appreciation by investing in the Asia investment grade and Asia high yield markets. The strategy emphasizes diversification across countries, industries, and issuers to help avoid any single risk factor having an outsized effect on the portfolio. In addition to helping capture opportunities, fundamental analysis has helped mitigate risk and sidestep defaults. This active management and flexible approach is central to PIMCO’s ability to navigate market changes in these uncertain times.
Putting research to work
PIMCO brings to market a large and experienced Asia credit research team, which both supports and leverages PIMCO’s broader portfolio management, credit research, and risk management teams across the globe. These resources engage with portfolio managers through every step of their responsibilities, from portfolio construction to ongoing monitoring and rebalancing.
At a time of low interest rates, PIMCO’s deep research expertise is here to help investors identify potential opportunities for higher yield, income, and long-term capital gains in the Asia bond market, while carefully seeking to mitigate downside risk.
Past performance is not a guarantee or a reliable indicator of future results.
All investments contain risk and may lose value. High-yield, lower-rated, securities involve greater risk than higher-rated securities; portfolios that invest in them may be subject to greater levels of credit and liquidity risk than portfolios that do not. Investing in the bond market is subject to risks, including market, interest rate, issuer, credit, inflation risk, and liquidity risk. The value of most bonds and bond strategies are impacted by changes in interest rates. Bonds and bond strategies with longer durations tend to be more sensitive and volatile than those with shorter durations; bond prices generally fall as interest rates rise, and low interest rate environments increase this risk. Reductions in bond counterparty capacity may contribute to decreased market liquidity and increased price volatility. Bond investments may be worth more or less than the original cost when redeemed. Currency rates may fluctuate significantly over short periods of time and may reduce the returns of a portfolio. Investing in foreign denominated and/or domiciled securities may involve heightened risk due to currency fluctuations, and economic and political risks, which may be enhanced in emerging markets. Mortgage and asset-backed securities may be sensitive to changes in interest rates, subject to early repayment risk, and their value may fluctuate in response to the market’s perception of issuer creditworthiness; while generally supported by some form of government or private guarantee there is no assurance that private guarantors will meet their obligations. Equities may decline in value due to both real and perceived general market, economic, and industry conditions. Derivatives may involve certain costs and risks such as liquidity, interest rate, market, credit, management and the risk that a position could not be closed when most advantageous. Investing in derivatives could lose more than the amount invested.
This material contains examples of the firm's internal investment research capability. The data contained within the reports may not be related to any product discussed herein, may be stale and should not be relied upon as investment advice or a recommendation of any particular security, strategy or investment product. In selecting case studies, PIMCO considers investment performance in addition to other factors, including, but not limited to, whether the example illustrates the particular investment strategy being featured and processes applied by PIMCO to making investment decisions. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.
Socially responsible investing is qualitative and subjective by nature, and there is no guarantee that the criteria utilized, or judgment exercised, by PIMCO will reflect the beliefs or values of any one particular investor. Information regarding responsible practices is obtained through voluntary or third-party reporting, which may not be accurate or complete, and PIMCO is dependent on such information to evaluate a company’s commitment to, or implementation of, responsible practices. Socially responsible norms differ by region. There is no assurance that the socially responsible investing strategy and techniques employed will be successful. Past performance is not a guarantee or reliable indicator of future results.
The credit quality of a particular security or group of securities does not ensure the stability or safety of an overall portfolio. The quality ratings of individual issues/issuers are provided to indicate the credit-worthiness of such issues/issuer and generally range from AAA, Aaa, or AAA (highest) to D, C, or D (lowest) for S&P, Moody’s, and Fitch respectively.
This material contains the current opinions of the author and such opinions are subject to change without notice. This material is distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. PIMCO as a general matter provides services to qualified institutions, financial intermediaries and institutional investors. Individual investors should contact their own financial professional to determine the most appropriate investment options for their financial situation. This is not an offer to any person in any jurisdiction where unlawful or unauthorized. | PIMCO Asia Limited is licensed by the Securities and Futures Commission for Types 1, 4 and 9 regulated activities under the Securities and Futures Ordinance. PIMCO Asia Limited is registered as a cross-border discretionary investment manager with the Financial Supervisory Commission of Korea (Registration No. 08-02-307). The asset management services and investment products are not available to persons where provision of such services and products is unauthorised. | No part of this publication may be reproduced in any form, or referred to in any other publication, without express written permission. PIMCO is a trademark of Allianz Asset Management of America L.P. in the United States and throughout the world. ©2020, PIMCO.