Having distinguished itself for its fixed-income expertise among investors in the U.S. and abroad, Newport Beach, Calif.-based Pacific Investment Management Co. LLC is now turning its attention to Canadian investors, aiming to earn a similar distinction in this country.
PIMCO, one of the world’s largest fixed-income money managers — with US$1.24 trillion in assets under management as of Dec. 31, 2010 — launched eight Canadian-registered mutual funds in January. The company has been managing assets for Canadian institutional investors for more than a decade, and the new mutual funds bring PIMCO’s investment products to Canadian retail investors for the first time.
“What we’ve done, basically,” says Stuart Graham, president of PIMCO Canada Corp. in Toronto, “is create retail versions of those various established strategies.”
The eight new funds include six actively managed fixed-income portfolios, along with a global balanced fund and a global equities fund.
Says Graham: “I think [the new funds] will be viewed as competitively distinct in investment process to what’s been traditionally available in the marketplace.”
Graham describes PIMCO’s approach as a “total return style” that seeks to provide clients with above-average fixed-income returns. In addition to core Canadian bond holdings, the new portfolios carry less traditional fixed-income instruments — real return, high-yield, foreign and emerging-markets bonds — in order to generate alpha.
“For many years, Canadian investors have paid active fees for passive returns,” Graham says. “Part of the PIMCO value proposition is that we have a demonstrative track record of adding alpha in this space.”
Graham expects Canadian investors and financial advisors to embrace this strategy, particularly while interest rates remain low. “People need their fixed-income, in a low-yield environment, to work harder for them,” he says. “A ‘total return’ style allows them to get a meaningful alpha out of that.”
Dan Hallett, vice president and director of asset management with Oakville, Ont.-based HighView Financial Group, says PIMCO’s tendency to deviate from fixed-income indices to a greater extent than most money managers will help distinguish the PIMCO Canada funds in the market.
“Most bond funds don’t have a lot of flexibility,” Hallett says. “This is where PIMCO has been a bit differentiated and where it has excelled with its flagship product in the U.S., in that it’s a pretty unconstrained product.”
Also distinguishing PIMCO from other mutual fund players is its vast global presence. The company has a team of almost 500 investment professionals around the world, upon whom the company relies to uncover fixed-income opportunities across the globe.
Although it’s challenging for any newcomer to break into in the highly competitive mutual fund industry, Hallett says, he expects PIMCO’s record of success in the U.S. to help its Canadian funds take off.
“It’s so tough for a new company to make real inroads, but PIMCO isn’t really new,” he says. “I would think it would have a rolling start just based on its brand and name recognition and reputation.”
Adding to the appeal of the new funds are their management fees, which Hallett says are about 20 basis points below average — a considerable difference in the fixed-income realm.
PIMCO Canada, in its efforts to accumulate AUM, is focused on generating advisor interest. Rather than advertising, the company’s sales team is meeting with brokerage firms and is actively circulating its investment research to acquaint advisors with its approach.
This strategy appears to be working. Graham says, as his company has been “pleasantly surprised” by the rapid growth in AUM. IE
PIMCO focuses on fixed-income returns
California-based investment firm launches eight mutual funds in Canada, six of which are fixed-income funds
- By: Megan Harman
- April 4, 2011 October 30, 2019
- 14:05