PIMCO is synonymous in the investing industry with bond mutual funds. More specifically, PIMCO is synonymous with Bill Gross and the PIMCO Total Return fund, which is the world’s biggest, and one of the best, bond mutual funds. However, PIMCO actually offers a full range of investment products, including equity mutual funds.
As Reuters reports, PIMCO actually managed to win the best large company equities award from the Lipper Fund Awards. I’m not sure whether to mock Reuters for repeatedly using Pimco, when everyone knows it’s PIMCO, or if there is an AP Style rule I’m missing. Either way, the bond mutual fund giant won the award last year as well, marking two straight years at the top.
Before you load all your money up into PIMCO StockPlus TotalReturn or PIMCO StockPlus Short Strategy fund, it is interesting to note that PIMCO’s funds of this nature aren’t very traditional. Rather than owning shares of publicly traded U.S. companies, these funds have a lot of investments in various derivatives and contracts. This allows PIMCO to profit from moves of a macro nature rather than being right about specific companies.
There is an advantage to this form of investing. For example, if your analysis says that the banking sector should rise, you might by shares in several major U.S. bank stocks. But, even if you are correct about the sector moving up, your gains can all be undone by one of your investments taking due to unrelated events such as a lawsuit or government action. By investing in securities and contracts that represent the overall sector, you can still be right, no matter which stocks conspire to make you look wrong.
PIMCO Total Return ETF
Although it didn’t win any awards, PIMCO does have another interesting offering called the PIMCO Total Return ETF. Like all exchange traded funds, this ETF trades like a stock that can be bought and sold anytime during the trading day. That allows investors to use stop-loss and limit orders.
Unlike ETFs tied to an index, this one is managed for “attractive risk-adjusted returns” by holding a portfolio of high grade intermediate bonds. The ETF is actively managed so it does behave like a mutual fund when it comes to returns.
The PIMCO Total Return ETF just started on March 1, 2012 and has a ticker symbol of TRXT. Should be interesting to keep an eye on this one over what promise to be at least a couple of volatile years in the markets.