Municipal Stability Managed Account
Investment Process
Municipal Bond Philosophy
Portfolio Construction
With a focus on limiting price volatility, the Stability strategy has historically generated more stable returns relative to the broad municipal market during periods of volatility. In pursuit of a stable return profile, portfolio managers leverage both quantitative analysis and our proprietary technology to identify what we consider the ideal mix of securities. This security mix is designed to meet a mandate of positive total returns if, over the course of the next 12 months, interest rates increase by 100 basis points (bps) and only minimal losses if interest rates increase by 200 bps over the same period.
With return of principal as the first priority, the Stability strategy also seeks to generate return on principal. Strategically allocating to callable and noncallable municipal bonds that meet our low volatility mandate, we pursue returns above those of cash and traditional cash investments, such as Treasury Bills, money market funds, and bank certificates of deposit. With higher after-tax return potential — and anchored by our strict downside risk mandate — we believe this strategy is an attractive solution for investors looking to put cash to work.
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