Scrapped PIMCO LIT sign of healthy market: LICAT

5 April 2022
| By Laura Dew |
image
image
expand image

With PIMCO scrapping its listed investment trust launch, fixed income vehicles could struggle to see investor demand in an environment of rising rates, according to the Listed Investment Companies and Trusts Association (LICAT).

PIMCO scrapped the launch of its LIT last week, it had been seeking to raise $500 million for a Global Income Opportunities vehicle but pulled it due to insufficient local demand.

Angus Gluskie, chief executive of LICAT, said around 50% of potential vehicles failed to reach the final prospectus stage and around 20%-30% failed to make it to issue.

“The process of the market saying ‘no’ is the sign the market is acting the way it should, it is always about demand and if there isn’t demand for that asset class then it won’t get listed. We don’t want products to be listed unless there is a healthy demand,” he said.

He hypothesised the PIMCO fund may have been popular at early stage – it could take up to 18 months to come to market- but in the intervening months, markets were now forecasting rising interest rates which were unattractive for a fixed income product.

“Fixed interest tends to lose value as interest rates go up and people’s expectations are for rate rises globally so that means investors will be hesitant to go into anything related to fixed interest. This particular area of fixed interest which was seeking a higher yield might have also brought about higher credit risk which is a huge risk in this environment.

“PIMCO might have had a good idea but it is a hard sell in this dicey environment. A year ago when interest rates were low then it might have been attractive.”

He also said the global approach might have also concerned Australian investors who were wary about being exposed to geopolitical turmoil compared to Australian fixed interest vehicles.

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

GG

So shareholders lose a dividend plus have seen the erosion of value. Qantas decides to clawback remuneration from Alan ...

2 months 1 week ago
Denise Baker

This is why I left my last position. There was no interest in giving the client quality time, it was all about bumping ...

2 months 1 week ago
gonski

So the Hayne Royal Commission has left us with this. What a sad day for the financial planning industry. Clearly most ...

2 months 1 week ago

A Sydney-based financial adviser has been banned from providing financial services in the interest of consumer protection after failing to act on conduct concerns. ...

3 weeks 3 days ago

ASIC has cancelled the AFSL of a $250 million Sydney fund manager, one of two AFSL cancellations announced by the corporate regulator....

3 weeks 1 day ago

Having divested its advice business in August, AMP is undergoing restructuring in at least four other departments amid a cost simplification program....

2 weeks 5 days ago