Investing: The 7 best Pimco funds
BY NELLIE S. HUANG Kiplinger News Service
Monday, February 25, 2013
2/25/13 at 3:24 AM
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Long admired for its team’s success at making big-picture economic forecasts, Pimco also shines when it comes to picking individual corporate bonds, specific commodities and more.
Investment Grade Corporate Bond (symbol PBDDX). Manager Mark Kiesel and a 90-person team determine the most-promising countries and industries to invest in, then search for the best companies within those countries and industries. The process has resulted in some superb moves, including Kiesel’s call of the top of the U.S. housing market in 2006. Over the past year, Kiesel has turned bullish on real estate-related sectors, buying up bonds of timberland owner Weyerhaeuser and drywall-maker USG Corp.
Global Bond Unhedged (PGBDX). Manager Scott Mather invests most of the fund’s assets in the developed world, but he may also buy the debt of emerging-markets governments and companies. He sees opportunity in sectors such as in bonds issued by KfW, the German state-sponsored development bank. Mather doesn’t hedge the fund’s currency exposure, which means it should shine when the U.S. dollar falls.
Income (PONDX). Since Income’s 2007 inception, it has paid a gradually increasing monthly dividend, yet the fund has been about a third less volatile than the average multisector bond fund. Manager Dan Ivascyn recently held 54 percent of assets in mortgages, 20 percent in developed-markets foreign debt and 16 percent in emerging-markets bonds.
Total Return (PTTDX). Pimco’s behemoth flagship fund continues to deliver stellar results and is the best option for profiting from manager Bill Gross’s top investment ideas. Currently, Gross has 44 percent of Total Return’s assets in mortgage securities and 20 percent in foreign debt.
Low Duration (PLDDX). This fund, also managed by Bill Gross, takes on less risk than Total Return. Low Duration recently held 65 percent of its assets in bonds that mature in three years or less, meaning it should be a safe harbor in a rising-interest-rate environment.
Commodity Real Return Strategy (PCRDX). Manager Mihir Worah uses derivatives to capture the performance of the Dow Jones-UBS Commodity Total Return index (derivatives are instruments that derive their price from something else). He invests most of the fund’s remaining cash in an actively managed bond portfolio made up primarily of Treasury inflation-protected securities.
All Asset (PASDX). Manager Rob Arnott believes a burst of rising prices is on the way, which will wreak havoc on traditional stocks in the short term. He believes junk bonds and emerging-markets debt are likely to hold up better than stocks and high-quality bonds. Rather than buy individual securities, Arnott invests in other Pimco funds and relies on computer-driven models to determine All Asset’s allocations.
Nellie S. Huang is a senior associate editor at Kiplinger’s Personal Finance magazine. To send her a question or comment, go to tulsaworld.com/kiplingerfeedback.