Portfolios Using PIMCO Mutual Funds

A number of our U.S. subscribers have asked us how we would implement our model target return portfolio solutions using just Pimco mutual funds. This section responds to that request.

The following table shows the Pimco Mutual Funds that correspond to the asset classes we use in our model portfolio solutions. Please note that we have tried to select the broadest based funds we could find. As we have discussed in our writing, in order to take "tilts" within these asset classes, investors may use other index or actively managed funds.

As you can see, there are a number of asset classes where PIMCO doesn't offer a product (yet).

The first is foreign commercial property. In this case, we use either the Fidelity International Real Estate Fund (FIREX) or the Cohen and Steers International Realty Fund (IRFAX).

The second is exception is timber. To track the performance of our model portfolios, we use a market cap weighted mix of timber real estate investment trusts: 70% Plum Creek Timber (PCL) and 30% Rayonier (RYN).

Pimco also lacks an offering in emerging markets equity. In this asset class, we use either VEIEX (for a mutual fund) or VWO or EEM for an exchange traded fund.

The closest Pimco comes to an uncorrelated alpha offering is the PIMCO All Asset Fund (PASAX). However, it is more typical of a global macro style hedge fund than the equity market neutral strategy we have used as a proxy for investments in uncorrelated alpha strategies. For this reason, we are using an equally weighted mix of five mutual funds that use “hedge fund-like” strategies. These include Hussman Strategic Growth (HSGFX), Analytic Global Long/Short (ANGLX), James Market Neutral (JAMNX), Rydex Absolute Return Strategies (RYMXQ), and JP Morgan Market Neutral (JMNAX).

The last asset class that is included in some of our model portfolios is U.S. equity market volatility, as tracked by the VIX index. Thus far, the only way to invest in this asset class is via futures contracts that track the VIX. Unfortunately, these are too complicated for most investors. We hope that at some point over the next two years, a futures-based index fund (similar to commodity index funds) becomes available in this asset class.

*Note that these are funds available to average investors. Those with more to invest may qualify for other share classes.

Update: January, 2006