Summary: If you want to bet that interest rates are going to fall even further, The PIMCO Long Duration Total Return Fund PLRPX is a great long duration bond fund from the best firm in the business.
Commentary: Since interest rates are at historical lows we do not recommend investing in any long duration bond fund at the moment. However, if you feel there is a reason to take extra interest rate risk in the current environment, then it is going to be hard to find a better fund than the PIMCO Long Duration Total Return Fund. This fund does particularly well when interest rates are falling, as they have since its inception in 2008. During that time the PIMCO Long Duration Total Return Fund P outperformed the average long term bond fund by 3.10% per year on average. Long duration is a double edged sword however, and during times when interest rates move higher as they did at the beginning of 2012, you should expect this fund to underperform.
The fund’s mandate allows it to invest across the fixed income universe. This is in contrast to other long duration funds which are mandated to stick with only certain types of bonds such as US Treasuries. We think this is important as it gives the fund’s portfolio manager Steve Rodosky additional flexibility needed in order to find opportunities in the current low yield environment. This fund is often listed on other sites as requiring a $1 Million minimum investment, however the P shares can be had from Fidelity and other places for a minimum investment size of $2500.
Short-Term Performance: Good Over the last 12 months, the PIMCO Long Duration Total Return P Fund underperformed the average long duration fund by -.85%%. However over the last 3 years the fund has outperformed the average long duration fund by .92% per year on average.
Long-Term Performance: Excellent The fund has outperformed its competitors over the last 5 years by an average of 3.10% per year. Since the fund was started in 2008, it does not have a 10 year track record.
Returns Relative to Risk: Good The PIMCO Long Duration Total Return Fund P does not take a lot of credit risk, with around 50% of the fund invested in treasuries and other government backed securities. The balance is made up of investment grade corporate bonds, municipal bonds, and around 9% in international bonds. Most of the risk here is coming from the fund’s long duration,which, at 13.86 years, is long even for the long duration category.
Fees: Good. No Sales load and .60% yearly expense ratio. You can learn more about mutual fund fees here.
Manager Tenure: Excellent Portfolio manager Steve Rodosky has been with the fund since its inception and with PIMCO since 2001.