Multi-assetMay 2 2013

Product review: Pimco GIS Inflation Strategy fund

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ByCharlotte Richards

Pimco has opted for a comprehensive real return asset allocation solution in its latest multi-asset fund.

The Pimco GIS Inflation Strategy fund has been designed to hedge global inflation risks while targeting enhanced after-inflation return. It will invest in emerging market currencies, commodities, real estate, global inflation-linked bonds and gold.

Mihir Worah, managing director and head of the real return portfolio management team at Pimco, will run the fund. He said: “We believe investors’ portfolios, which traditionally include stocks and bonds, may be inadequately positioned to withstand rising inflation.”

Tail-risk hedging will also be used to limit the impact of periodic market stresses that may affect inflation-related assets. The firm said the strategies are designed to protect downside risk.

The fund will combine a top-down macroeconomic view with a bottom-up relative value perspective from two teams: the Pimco Global Investment Committee and the Asset Allocation Committee. The unified management fee is 2.1 per cent pa.

Pimco will make a sterling share class available to advisers through platforms in the coming months, with a minimum investment of $5,000 (£3,264). Investors are currently able to access the fund via retail and institutional share classes.

MM View:

It is little surprise that with the threat of inflation rising around the globe, fund groups have picked up on the idea of creating a fund suitable to beat rising prices.

Pimco’s GIS Inflation Strategy fund is the latest in the group’s Dublin-registered Ucits-compliant Global Investor Series range, which has 45 sub-funds and £99bn under management.

A truly multi-asset fund, it actively manages the asset allocation and underlying investments of a broad spectrum of assets.

Fund manager Mihir Worah said investors should always be prepared for the risk of rising inflation. “While [government and central bank] policies have successfully suppressed the risk of deflation and depression posed by the crisis, they have also increased the risk of higher inflation in the years ahead,” Mr Worah said.

He added that Pimco’s real return expertise helps him determine how many inflation-sensitive assets to buy in any given environment.

Given these potential risks, the firm said it believes investors’ portfolios may be poorly placed to confidently respond to rising inflation. The manager said portfolios in the past 20 to 30 years have largely been a mix of stocks, shares and bonds – but equities typically deliver the best returns in times of stable inflation and strong growth, while bonds generally perform well during periods of flat or falling inflation. As a result, Mr Worah said the two asset classes that dominate most investment portfolios don’t perform well in times of rising inflation.