Analyst Report
Morningstar's Take

by Eric Jacobson
PIMCO GIS Diversified Income Fund's still ample staffing, analytical resources, and proven approach merit a ‎Morningstar Analyst Rating of Gold for its lowest-priced share classes along with Silver and Bronze ratings for ‎its more costly shares.‎

The December 2022 departure of comanager Eve Tournier hasn’t left this fund bereft of management ‎talent. Coinciding with her loss, Pimco shifted Sonali Pier into the role of lead day-to-day manager (a position she has held for several years on the strategy's U.S. domiciled offering), and added Charles Watford and Regina Borromeo to the team here, ‎alongside Alfred Murata and Dan Ivascyn (PIMCO’s group CIO). Watford joined ‎Pimco in 2007 and is a portfolio manager in the London office, focusing on high yield, with research ‎responsibilities for the European automotive and real estate sectors. Regina Borromeo joined Pimco in ‎September 2022 after spending four years at Robeco as a senior portfolio manager and director of ‎Global Macro Fixed Income. Given Pier’s oversight, Ivascyn and Murata’s assistance, and the addition ‎of more resources, the strategy retains its High People rating.‎

Pimco's selection of a benchmark that is well matched to the strategy’s investment universe is also ‎key to its appeal, given typical industry practice of running broad-ranging portfolios against bogeys ‎with much narrower parameters. This one’s custom-built index comprises roughly one third each in ‎investment-grade ‎corporates, high-yield corporates, and emerging-markets debt across the globe. ‎That gives the portfolio ‎considerable emerging-markets and global credit exposure, as well as a sometimes comparatively long duration. The latter ‎has been especially ‎notable given that global bond market durations have extended in recent years ‎while many managers have trimmed back duration.

‎That has occasionally knocked the portfolio off course, including during the first half of 2022. Losses in ‎its overall emerging-markets exposure (including some early-year exposure to Russia) were a drag, ‎but the impact was less than half as severe as ‎the pain caused by its interest-rate sensitivity (as ‎measured by duration), according to Pimco data. That was triggered by an historically unusual mix of ‎pain in ‎global credit markets along with an inflation spike and rising government bond yields. A similar ‎duration issue caused trouble ‎in 2021—despite relative success over the rest of the year--when yields spiked during that year's first quarter.

In the context of a decidedly aggressive credit mandate, the strategy benefits from a circumspect, ‎‎benchmark-aware style—a crucial source of structure given its many moving parts. The ‎strategy’s ‎trailing-returns data has been muted by its recent stumbles, but otherwise belies a history ‎that has ‎made it a compelling choice for global credit exposure.‎
Morningstar Medalist Rating™Pimco has added significant resources in the wake of a recent manager departure‎.
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Morningstar Pillars
ParentAbove Average
Morningstar Medalist RatingMorningstar assigns the Medalist Rating to funds that are qualitatively and quantitatively assessed through manager research and algorithmic processes. The assessment turns on three key “pillars” – People, Process, and Parent – that yield an estimate of how well a fund will perform before fees but after adjusting for risk.
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