How to invest with PIMCO?

Pimco, or the Pacific Investment Management Company, is an American investment management firm founded in 1971 in California. The firm focuses on bonds and today manages more than $1.92 trillion in assets.

Under its founder, Bill Gross, and with the help of the famous pundit Mohammed El-Erian, Pimco became the largest and most prestigious bond fund in the world in the 1990s.

But Gross and El-Erian have since left the fund. It’s new management has not always made the best choices; the Pimco Total Return Fund, once its flagship, only returned 2.7 per cent last year.

Pimco, however, is making a comeback with its Total Income fund.

This fund typically invests in assets among several fixed-income sectors including government bonds, corporate bonds, high-yield bonds and foreign bonds.

Analyst Morningstar notes that the performance of this fund has continued to be strong. The fund has returned 5.20 per cent over the past year, 3.93 per cent over the past three years, 5.38 per cent over the past five years and 6.79 per cent over the past decade.

As of December 23, 2020, the fund had assets totalling almost $128.69 billion invested in 7,722 different holdings. Pimco said in a recent statement that assets had been chosen all from the highest grades of rated bonds.

This explains why the fund places in the 12th percentile of its Morningstar category for the trailing 12 months, the fourth percentile for the trailing three years, and the second percentile for the trailing five and 10 years as of mid-February 2018. A category placement in the first percentile is the best, while one in the 100th percentile is the worst.

For this kind of return and low-risk investment, one must expect to pay a substantial management fee. The fund charges a front-end sales load of 3.75 per cent, which means out of every $10,000, $9,625 is invested with the remaining $375 going toward sales commissions. This is on top of an expense ratio of 0.85 per cent, which is classified as low by Morningstar compared with other funds in this category.

Pimco issued a note recently claiming that that US economic activity will hit pre-recession peaks in the second half of the year. Global gross domestic product, Pimco says, will grow at the fastest rate in a decade, buoyed by the worldwide rollout of Covid-19 vaccines.

That’s only one scenario, in complex times, however. This is why investment in bond funds like this which minimise risk and still provide a solid return make sense to many investors.