PIMCO GIS Glb Hi Yld Bd E EURH Acc |
Morningstar's Take
|10/06/2021by Patrick Ge, CFA
Pimco GIS Global High Yield Bond remains a solid choice for conservative high-yield bond exposure. Its veteran management, disciplined approach, and ample analyst support earn Morningstar Analyst Ratings of Silver and Bronze on its cheaper share classes to Neutral on its most expensive.Lead manager Andrew Jessop's approach is disciplined. He keeps this global strategy focused on the higher-quality end of the high-yield spectrum, as represented by its ICE Bank of America Merrill Lynch BB-B Rated Developed Markets High Yield Constrained Index benchmark. As a result, the portfolio's CCC stake (5% as of March 2021) is usually much smaller than the broader market's and kept well-diversified by issuer. That profile explains much of the fund's peer-relative performance: a tendency to protect during credit market downdrafts and lag during rallies.The strategy's protective quality was on display in 2020's first quarter, when fears about the coronavirus' impact on the economy sent high-yield bond prices tumbling. Its 20.1% drop (R clean share class) from 20 Feb through 23 March was painful but still better than two thirds of its global high-yield bond Morningstar Category peers. Jessop had positioned the fund conservatively relative to its benchmark coming into 2020, with elevated cash levels and an emphasis on defensive industries, such as healthcare, over cyclical sectors, such as energy and metals and mining. He remained wary of cyclicals as the market recovered but was able to take advantage of select opportunities in some pandemic-affected issuers as well as lower-quality issues in more economically resilient industries.The strategy has lagged its typical peer in the subsequent high-yield rebound, which favoured the market's riskier constituents, repeating a pattern that has played out in prior downturns and recoveries. The strategy hasn't always been left behind in credit rallies, however, as the team's bond-picking has helped it recover ground lost to its conservative credit-quality makeup at times. That, plus losing less in downturns, have rewarded investors over the long term with peer-beating volatility-adjusted returns. |
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Portfolio RoleSupporting
| Morningstar Pillars | |
| People | Above Average |
| Seasoned. | |
| Parent | Above Average |
| Pimco's investment culture is robust. | |
| Process | Above Average |
| Prudent. | |
| Performance | |
| A mild ride. | |
Morningstar Analyst RatingMorningstar evaluates funds based on five key pillars, which it's analysts believe lead to funds that are most likely to outperform over the long term on a risk-adjusted basis.
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