Pimco’s interest fixed on the game
The alpha hunter’s interest at Pimco is fixed on one thing, fixed interest. And according to Australian executive vice-president John Wilson, this narrower focus gives Pimco an edge.
Competitors of Pimco are all investment banks, which must juggle equities, property and alternative investment portfolios. And single focus attracts top talent.
“One of the great things about being specialist is that people who are fervent about that asset class want to come and work for us.”
Size matters too, Wilson says. And so does global reach. Pimco is the world’s biggest fixed interest manager, so it can muscle its way into big deals with corporations from Qantas to Microsoft.
In the three years to December 31, 2005, Pimco’s Global Fixed Interest fund has delivered investors an annualised return of 7.8 per cent a year, the best return of all Australian funds in this asset class. But even more impressively, the fund’s reward to risk ratio is also the highest.
This doesn’t mean the fund avoids venturing below investment grade to harness yield opportunities.
“The trick with high yield is to remember that it’s very security specific, so you need to do very thorough analysis, much like an equities investor,” Wilson says.
Despite knowing how to find treasure in the junkyard, Wilson says sub-investment grade investments formed less of the fund’s portfolio last year because credit spreads contracted.
“So we’ve migrated into things like mortgage-backed securities, bank loans, and short-term government securities.”
Runners up Colonial First State won praise for effectively transferring its credit alpha from global markets to Australian benchmarks.
“Our credit funds have successfully captured and kept attractive spreads from the global markets,” CFS head of fixed interest Warren Bird says.
Fixed interest (diversified)
Winner: Pimco Australia
Finalist: Colonial First State Investments
Finalist: Credit Suisse Asset Management
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