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Text on screen: PIMCO provides services only to qualified institutions and investors. This is not an offer to any person in any jurisdiction where unlawful or unauthorized.
Voice-over: From inflation to interest rates, today’s ongoing disruptions present opportunities for investors.
In this series, our portfolio managers explore how PIMCO’s deep expertise across public and private markets gives investors the flexibility to navigate the ever-evolving landscape.
Text on screen: Leveraging an Integrated Platform to Quickly Seize Opportunities
Images on screen: PIMCO trade floor
Text on screen: Mohit Mittal, CIO Core Strategies
Mittal: Few entities around the globe can deploy multiple billion dollars at one time if the analysis proves that there’s an opportunity for our clients.
The reason we are able to take that size is the integrated nature of our platform. Such large transactions, they will quickly go to the investment committee where the investment committee can make that decision with the help of all the experts.
If there’s an opportunity that is pertinent for public side—or even private side—the fact that it can be discussed across multiple larger strategies at PIMCO. Those pools of assets can be brought in together to take advantage of that opportunity.
Text on screen: Jamie Weinstein, Portfolio Manager, Private Credit
Weinstein: Right. It goes to how the teams are constructed, right? The integrated analyst team, the integrated portfolio management team, information is not sort of segmented and compartmented in that way.
Here, it really is one team. And so, when there’s a scale trade and the risk/reward fits multiple vehicles, it’s our job to find those homes as effectively as we can to serve our clients.
Text on screen: Finding Creative Solutions Through Collaboration
Images on screen: PIMCO trade floor
Weinstein: One of the hung-deal transactions that we worked on last year, we came up with an idea of trying to tackle this hung position for the bank syndicate.
And it was one of those where if you couldn’t solve the whole problem for the bank group that was saddled with this risk, then they weren’t likely to engage. But if you could, then they might. And so, the nature of being able to work across the firm and come up with a bid for the entire piece, we went with a very aggressive in our favor list of asks to that bank syndicate to actually change the documentation on the deal to make it more creditor-friendly. And so, it very quickly turned into a transaction, a very large-scale transaction for us, over $1 billion in market value. But came out of the nature of being able to work across public and private.
Mittal: And then, I think a few things that come to mind are particularly during the post-COVID period. So, this is like March/April/May 2020 when a certain sector—travel and transportation related—was very heavily hit, had very high liquidity needs in the short term because there was no revenue generation. Nobody was traveling, so they needed to be able to secure that financing. But the markets were not willing to provide them that financing.
So, we were able to creatively partner with them looking at what collateral can we have against the financing that we would provide, structure many of the collateralized or secured deals, secured by aircraft, secured by ships, secured by gates and slots as well as aircraft parts and were able to acquire pretty sizable exposures working with the entirety of PIMCO’s credit team.
Text on screen: Using a Coordinated Approach During the 2023 Banking Crisis
Images on screen: PIMCO trade floor
Mittal: I’ll use Silicon Valley Bank as a recent example. So, it’s a public market issuer. This situation quickly unraveled in a span of a couple of days. So, what we did was we went into that swat approach where we augmented our traditional analyst with a senior analyst from the special situations team.
The two of them worked together and came up with a revised assessment. Now, during that few-day period, it went from an investment-grade company to a defaulted company as well. In many of the traditional portfolios, what we saw was investors selling left, right, and center.
We were seeing bonds being offered at 30 cents on the dollar, 25 cents on the dollar. And our analysis with this approach was that we think the recovery could be higher once we did the analysis. And for some of our flexible strategies, using that partnered approach, we were able to acquire exposures that have since rallied from 30-60 cents instead of us having to sell in our traditional strategies at 30 cents.
Weinstein: In a situation like that, while it was unfolding, and while the team was analyzing what we thought the value of the structure would be, we were also deeply engaged in trying to buy assets or provide financing to other parties who might be trying to buy assets.
So, we had kind of discussions going on every front. And then, subsequent to the failure of the bank, we’ve been engaged again in trying to buy different blocks of assets using our private teams to do that while we were continuously refining our analysis on the public securities that you could trade. So, a very fluid and integrated approach, respecting the public/private nature of information, but being able to tie together as much as we could in real-time and sharing the intelligence as it developed.
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All investments contain risk and may lose value. 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. Private credit involves an investment in non-publically traded securities which are subject to illiquidity risk. Portfolios that invest in private credit may be leveraged and may engage in speculative investment practices that increase the risk of investment loss. Investments in Private Credit may also be subject to real estate-related risks, which include new regulatory or legislative developments, the attractiveness and location of properties, the financial condition of tenants, potential liability under environmental and other laws, as well as natural disasters and other factors beyond a manager’s control. Mortgage- and asset-backed securities may be sensitive to changes in interest rates, subject to early repayment risk, and while generally supported by a government, government-agency or private guarantor, there is no assurance that the guarantor will meet its obligations.
Diversification does not ensure against loss.
This material contains the opinions of the manager and such opinions are subject to change without notice. This material has been 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.
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