Pacific Investment Management Company, LLC

PIMCO_569720251
Preparing for the New Normal

Global investment management and solutions firm Pacific Investment Management Company, LLC, or PIMCO, opened its doors in Canada in 2004. This addition, the world’s largest mutual fund, with assets of more than $1.3 trillion worldwide, brought a formidable competitor to the mutual fund market.

PIMCO’s mantra is straight forward, to be the global investment authority for retail and institutional investors. Stuart Graham, President of PIMCO Canada, tells CBJ exclusively that this means “to take a needs based approach to whatever [the investor’s] needs might be, and increasingly in today’s market those are more complicated needs, and we align that with appropriate investment solutions.”

Fixed income investments have broad appeal

The historical roots of PIMCO are fundamentally a fixed income investment house, and while the company has broadened its capabilities, PIMCO is globally recognized for its results in this forum. Started on the sunny shores of Orange County, Calif., by three men with a view to hire the best and brightest and revolutionize the markets, fast forward 40 years, PIMCO has $1.3 trillion (yes, with a T) in global assets, $9.7 billion of which are in Canada, making it one of the world’s most successful companies.

Typically, investors have an appetite Global investment management and solutions firm Pacific Investment Management Company, LLC, or PIMCO, opened its doors in Canada in 2004. This addition, the world’s largest mutual fund, with assets of more than $1.3 trillion worldwide, brought a formidable competitor to the mutual fund market.

PIMCO’s mantra is straight forward, to be the global investment authority for retail and institutional investors. Stuart Graham, President of PIMCO Canada, tells CBJ exclusively that this means “to take a needs based approach to whatever [the investor’s] needs might be, and increasingly in today’s market those are more complicated needs, and we align that with appropriate investment solutions.”

Fixed income investments have broad appeal

The historical roots of PIMCO are fundamentally a fixed income investment house, and while the company has broadened its capabilities, PIMCO is globally recognized for its results in this forum. Started on the sunny shores of Orange County, Calif., by three men with a view to hire the best and brightest and revolutionize the markets, fast forward 40 years, PIMCO has $1.3 trillion (yes, with a T) in global assets, $9.7 billion of which are in Canada, making it one of the world’s most successful companies.

Typically, investors have an appetite for bonds, or fixed income investments, in tumultuous economic times, when low risk and low reward is an appealingly safe bet. With a top down, macro-economic framework, PIMCO’s long-term perspective on the market makes its funds attractive to the conservative investor.
“If we can get that top down thesis correct, then we are going to make appropriate investment decisions for investors,” says Graham. “We dub this framework ‘The New Normal’.”

The framework of The New Normal is that the current economic situation is not your garden variety recession and recovery; rather, what we are seeing is a fundamental and durable changes to the investing landscape.

“Key reasons behind these changes are related to deleveraging in the market and now both businesses and household consumers trying to dig themselves out of high debt rates,” says Graham. “Reregulation in the market place is one factor. Another is an increasingly multispeed economy, meaning developing markets are in this cycle of very low growth, while emerging markets are experiencing a breakout phase of their development.”

The market and investors trust PIMCO’s ability to understand the macroeconomic framework, and to translate that into an investment strategy which, over business cycles, has produced meaningful alpha for clients. “We earned that $1.3 trillion the old fashioned way, namely we have never merged with anyone, but have earned business one investor at a time.”

When asked to comment on the turbulence in the markets of late, Graham replies, “These last eight weeks has been a more challenging investment environment than we have seen in the previous 10 months. We have seen extraordinary events, not the least of which is the crisis in Europe and the U.S. credit ranking downgrade which make it difficult to invest in that period. Fundamentals are not really what are driving the market and that has created noise in the portfolio lately.”

Despite these truths, Canada has been sheltered somewhat by these extraordinary events. In an essay entitled A Practical Guide to Liability-Driven Investing, PIMCO’s Ed Devlin, Executive Vice-President and head of Canadian portfolio management, states, “Since the financial crisis, we have found that many investors are more concerned about financial repression: a process by which government policies are designed to keep real rates of return low in order to help countries to reduce their debt-to-GDP over time by providing savers with a poor inflation-adjusted rate of return…In Canada, we expect less financial repression than in the U.S. or United Kingdom. At the same time, Canada appears to be a destination of choice for much of that offshore capital trying to escape financial repression. In this New Normal environment, we expect to see low real yields while breakeven inflation expectations (BIE) remain well anchored.”

Eight new Canadian funds

At the beginning of this year, PIMCO launched Canadian registered mutual funds, offering diverse investment solutions for client’s particular needs. Ranging from Short Term Bonds, to Total Return Bond Funds, and Global Balanced Funds, these funds are an innovative suite of investment solutions, created within the framework of The New Normal.

Investors are welcomed to review PIMCO’s literature or visit its website, or Canadian office in downtown Toronto. 

www.canada.PIMCO.com

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