PIMCO Fundamental Advtg Total Ret InstlPFATX

Fund Research and Analysis

by Nadia Papagiannis, CFA

PIMCO Fundamental Advantage Total Return is unique, but we're not completely sold on it.

This fund contains a bond portfolio similar to PIMCO's core-plus portfolios but then overlays a long-short equity index strategy. Essentially, the fund takes a long position in (maintains exposure to) the RAFI, the Research Affiliates Fundamental Index, and a short position in the S&P 500 with swaps. Read more

Kudos

The fixed-income foundation of this fund is managed identically to the Harbor Bond Fund, an Analyst Pick.

The fund brings the institutional portable alpha strategy to mutual fund investors at a reasonable cost. Read more

Risks

Fundamental indexing is a new approach to value investing that remains untested in many market environments.

The strategy is implemented using over-the-counter derivatives. The over-the-counter market has counter-party risk and faces changing regulations that might hurt the fund's performance. Read more

Strategy

In addition to the returns on the fixed-income portfolio, this portable alpha strategy earns the total return of an equal investment in a custom Research Affiliates Fundamental Index less the total returns of the S&P 500 and financing costs (about 30 basis points with swaps). Read more

Management

Three time Morningstar Manager of the Year Bill Gross leads the PIMCO team managing this fund. PIMCO manages the bond portfolio of this fund, while simultaneously implementing derivatives to earn the alpha from Research Affiliates' portfolio. Research Affiliates is a well-known quantitative investment advisor headed by Rob Arnott and Jason Hsu who have published academic studies related to fundamental indexing. Read more

Inside Scoop

Leveraging the successful performance of the PIMCO Total Return Fund, Bill Gross and his team have paired up with Research Affiliates' fundamental indexing group to offer a portable alpha strategy to a mutual fund audience. Read more

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