Municipal Extended Value Managed Account

Strategy Overview

Pursues a high level of total return by leveraging our deep expertise in non-standard bond structures, in particular callable municipal bonds

Achieves what we consider more accurate valuations of complex bond structures relative to industry-standard pricing benchmarks, informing careful security selection to add value to portfolios

Employs a disciplined approach to structuring Municipal Extended Value portfolios, including purchasing longer-maturity bonds and actively selling with the goal to capture additional rolldown return

Pursues enhanced tax-efficiency through our systematic tax loss harvesting process and the option of National, California, or New York state-specification

Leverages our specialized separately managed accounts (SMA) team, which seeks to provide best-in-class service tailored to the needs of muni SMA clients

Investment Process

Utilizing our disciplined investment research process, PIMCO aims to uncover value and protect principal in clients’ municipal investment portfolios through comprehensive credit and quantitative research. Leveraging our quantitative research to calculate what we believe are more accurate valuations of non-standard (e.g., callable) security structures, we identify attractive investment opportunities. By way of holistic fundamental credit research, we also aim to select securities possessing underlying credit strength that may be misaligned with market perception, positioning us to capture alpha while mitigating downside risk.

Municipal Bond Philosophy

Taking a 360-degree view, we seek to maximize tax-efficient income and help preserve principal by investing in high quality municipal bonds. Our muni experts identify opportunities and potential risks in the municipal bond market using fundamental bottom-up analysis informed by PIMCO’s top-down global macroeconomic outlook. By applying institutional discipline to a muni market traditionally comprised of smaller investors, we believe our muni platform is distinctly positioned to capitalize on market inefficiencies to unlock potential in clients’ muni portfolios. Supported by our specialized team of muni SMA experts, our muni SMA clients may additionally benefit from our belief that individual clients should receive individualized service.

Portfolio Construction

Targeting attractive levels of price appreciation through rolldown return and, at times, spread tightening, PIMCO meticulously selects callable structures with favorable rolldown characteristics. Comprised of high-coupon callable bonds, Municipal Extended Value portfolios are positioned with the goal to take advantage of higher relative yields and risk-adjusted return potential that is skewed toward the intermediate and long portions of the yield curve.

Additionally, we aim to maximize total return in the Municipal Extended Value strategy by actively selling securities when we believe the largest anticipated amount of price appreciation is achieved — and reinvest proceeds back into longer, higher-yielding bonds. The strategy utilizes a proprietary interest rate and pricing model to provide what we consider more accurate valuations of callable bonds relative to managers who use industry standard pricing benchmarks, such as the Thomson Reuters Municipal Market Data (MMD) AAA curve, that don’t account for the municipal market’s variety of coupons and embedded call options. We believe our approach to valuing complex muni bond structures and strategic security selection assists us in pursuing a high level of total return without compromising on credit quality. In aiming to take advantage of the way that targeted callable bond structures roll down over time, this strategy employs a disciplined, active sell approach.

Disclosures

The managed account strategies described in this material are offered by Pacific Investment Management Company LLC and are available exclusively through financial professionals. Managed accounts have a minimum asset level and may not be appropriate for all investors. Financial professionals seeking more information should contact their managed accounts department or call their PIMCO representative.

Past performance is not a guarantee or a reliable indicator of future results.

Individual account holdings will vary depending on the size of an account, cash flows and account restrictions. Portfolio holdings are subject to change daily without notice. At any time an individual account managed in this strategy may or may not include securities held by another portfolio. Consequently, any particular account may have portfolio characteristics and performance that differ from another individual account in this strategy.

A word about risk:

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.

Investing in foreign-denominated and/or -domiciled securities may involve heightened risk due to currency fluctuations and economic and political risks, which may be enhanced in emerging markets. Sovereign securities are generally backed by the issuing government; obligations of U.S. government agencies and authorities are supported by varying degrees, but are generally not backed by the full faith of the U.S. government; portfolios that invest in such securities are not guaranteed and will fluctuate in value. Inflation-linked bonds (ILBs) issued by a government are fixed income securities whose principal value is periodically adjusted according to the rate of inflation; ILBs decline in value when real interest rates rise. Floating rate loans are not traded on an exchange and are subject to significant credit, valuation and liquidity risk. Mortgage- and asset-backed securities may be sensitive to changes in interest rates, subject to early repayment risk, and their value may fluctuate in response to the market’s perception of issuer creditworthiness; while generally supported by some form of government or private guarantee, there is no assurance that private guarantors will meet their obligations. Derivatives may involve certain costs and risks, such as liquidity, interest rate, market, credit, management and the risk that a position could not be closed when most advantageous. Investing in derivatives could lose more than the amount invested.

The credit quality of a particular security or group of securities does not ensure the stability or safety of the overall portfolio.

PIMCO as a general matter provides services to qualified institutions, financial intermediaries and institutional investors. Individual investors should contact their own financial professional to determine the most appropriate investment options for their financial situation. This material contains the current 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. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission.

Pacific Investment Management Company LLC, 650 Newport Center Drive, Newport Beach, CA 92660 is regulated by the U.S. Securities and Exchange Commission. PIMCO is a trademark of Allianz Asset. Management of America LLC in the United States and throughout the world. ©2024, PIMCO.

CMR2023-0828-3085636

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