March 2012 – When you invest in PIMCO’s Total Return Fund (PIMCO’s largest and most popular fund), you are not necessarily getting the firm’s best ideas. The fund must limit its holdings to primarily investment grade, intermediate term bonds. Within these constraints, the PIMCO Total Return Fund does its best to achieve the highest return. As the name implies, PIMCO’s Unconstrained Bond Fund is different.
What is PIMCO thinking? According, their most recent monthly Unconstrained Fund commentary:
The fund gives a detailed breakdown of its February performance numbers. The fund made money on their holdings of corporate bonds, especially financials since the sector outperformed the Investment Grade Corporate sector. Exposure to the industrial sector was also positive. Net long Agency Mortgage Backed Securities (MBS) exposure, including relative value coupon trade proved little negative for the month. However, modest exposure to non-Agency MBS proved beneficial for the fund. Exposure to Munis, BABs and Treasury Inflation Protected Securities (TIPS) were neutral for returns.
Foreign currency exposure overall added to the fund’s return with long positions in (MYR), Mexico (MXN) and India (INR) and short position in Japan (JPY) proving positive. However, short positions in Australia (AUD), Europe (EUR), Hungary (HUF) and UK (GBP) turned negative for the month.
|Term (as of Mar 20, 2012)||Returns|
|Last 30 days||-0.11%|
|Last 90 days||0.84%|
If you invest in this fund, you should expect more performance volatility then the Total Return Fund.