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Pimco funds - am I missing something?

Look at
This is an unbelievably bad record - look at the 5 year return column.
The only funds which made a reasonable amount of money are the long bond funds --- even Rob Arnott's RAFI (Research Associates Fundamental Index = equal weighted index) have done poorly.


  • In 2015, 10 year treasuries yielded 2.14%, in 2016 it was 1.84%, then 2.33% (2017), 2.91% (2018), 2.14% (2019), and 1.17% (annualized) so far this year. So just looking at yield, one might have hoped for a tad north of 2%/year.

    IEF, an ETF of 7-10 year maturity Treasuries has an average duration of 7.6 years.

    Let's figure that over five years rates dropped by around 1% and duration was around 7.6 years So applying some back of the envelope calculations, appreciation was around 7% (allowing for some convexity) giving us maybe 1.3%/year annualized appreciation over five years.

    Keep in mind these are all very crude estimates. Still, that adds up to around 3.5%/year over the past five years for the intermediate treasury market. Non-treasuries yield more but may not have had the same appreciation.

    VFITX (intermediate treasury) has returned 3.26% annualized over the past five years.
    VSIGX (interm treasury index) has returned 3.39%

    VISCX (intermediate corp index) has returned 4.22%, and its benchmark index is at 4.41%
    (All Vanguard data from Vanguard's site.)

    Disregarding junk and securitized debt (categories that have done worse), one expects an intermediate term fund to have had returns falling somewhere between these figures. So PTTRX (3.89%), PIMIX (3.85%), even PMDRX (3.24%) seem to have held their own.

    Over five years, PTTRX is 0.67% above its category, 0.04% above its index.
    PIMIX is 1.58% above its category and matching its index.
    PMDRX is 0.02% above its category, though 0.61% below its index.
    (Data in this paragraph is from M*)

    The record that seems "unbelievably bad" is not PIMCO's but that of the market. PIMCO has done fine with bonds. Arnott is a completely different story.
  • I could never figure out what Arnott was doing so I got out a long time ago.

    The "new normal" may mean back to basics. Bye bye derivatives etc
  • edited May 2020
    At a shop with many funds, saying "this is an unbelievably bad record' without citing any numbers is sort of like saying "Fish, what's up with that?" Be specific about the individual funds with bad records or pub a ratio of funds outperforming their peers and benchmark versus underperforming to analyze the entire shop.

    @MSF Looking at those individual funds is better but you used institutional share classes only. Not everyone owns those.
  • Here's a rough approximation of an answer, responding to Lewis's concern about the skew created by institutional shares. I searched the MFO database for all PIMCO funds with a five-year record and an investment minimum of $10k or less. Basically, the "A" and "C" share classes of each fund.

    113 results, pretty much half "A" and half "C." EM Currency and Short-Term Investments doesn't report a "C" class, which is why the number is odd rather than even. So, 57 "A" share classes.

    Of the 57, 35 (61%) have peer-beating absolute returns, 3 exactly match their peers, 19 lag.

    If you switch to Charles's MFO Rating, a risk-adjusted return metric that uses the more conservative Martin Ratio rather than the Sharpe ratio as its basis, 20 of 57 funds have four or five star (above to much above average) ratings and another 21 have three star (just a bit above or below average) ratings. One fund, a money market doesn't have a rating. So, 72% "okay to excellent" over the past five years.

    - - - - -

    What unites the real stinkers? Mostly the word "real." PIMCO created a series of inflation-proof funds with the word "real" in their names. They incorporate hedges like TIPs, commodities and so on. Absent inflation, they've really sucked.

    Also "Dividend and Income," for reasons I haven't explored.

    - - - - -

    But remember: five years is an arbitrary period based solely on the number of fingers and toes we possess (rolls eyes) and the measurement in question ends in the midst of a massive downturn which skews the results.

    On whole: relatively few strategies have been soaring over the past five years, and many of them ignore traditional virtues like valuation, income-production and diversification. That would make me cautious of using them for a guide.

    For what that's worth,


  • The other question with regard to A and C shares is whether returns should be load adjusted or not. Many brokers now wave the load so maybe it doesn't matter.
  • I have the sense that very few people actually pay front-loads anymore, so I was imagining "A" is the equivalent of retail, no-load. And if you adjusted PIMCO for loads, you'd need to adjust the peer group. And, depending on the data provider, you'd need to adjust for the biases injected by high-cost "C" shares and . . . and ...

    For me, this is about as close as I need to get: "pretty respectable," mostly and a reasonable pattern distinguishing the dogs.
  • The difference in ERs between institutional class shares and A shares at PIMCO is on the order of 0.3% - 0.4%. So just subtract that from the performance figures. Admittedly, these are larger difference than the 0.25% 12b-1 fee difference one finds at most fund families.

    Total Return Fund share classes
    Income Fund share classes
    PMDRX is only available in institutional class shares.

    A shares are indeed the equivalent of retail, no load. They're where all the D share investors were moved. More generally, I don't think that A shares should be load adjusted for several reasons:
    • Most people buying the shares on their own are not getting charged the load (as noted)
    • People buying these shares with a load with the help of advisors are receiving value for that payment - the services of the advisor. (One can debate whether this "value" has any value, but that's a different question.)
    • People who buy these shares themselves with a load perhaps do need an advisor; they should get what they pay for.
    • There is no clear amortization period for the load. Just because we're looking at five year returns doesn't make five years the correct length of time.
    With respect to C shares, they are automatically "load adjusted", because the load is embedded in the ER and thus in the performance figures. Using the logic above (that this is a fee for advice, not a cost of running the fund), I respectfully suggest that the load portion of the ER be backed out when evaluating the performance of the fund itself. Though as David observed, this gets to be an absurd exercise with dubious benefit.

    Finally, with respect to 5 years being arbitrary and skewed by recent performance. It is certainly arbitrary. I've commented in a few other posts about how a recent sharp downturn can skew even long term figures, especially with more aggressive and/or volatile funds.

    That said, I didn't add the comment in my post above because at least for vanilla bond funds, YTD performance is positive and in line with long term performance. Of course, the more one moves away from vanilla, the greater the skew:

    Intermediate Core: YTD: 3.27%, 5 year 3.22%
    Intermediate Core Plus: YTD 1.17%, 5 year 3.15%
    Multisector: YTD -6.61%, 5 year 2.13%
    High Yield: YTD -9.98%, 5 year 2.09%
  • That said, I didn't add the comment in my post above because at least for vanilla bond funds, YTD performance is positive and in line with long term performance. Of course, the more one moves away from vanilla, the greater the skew:

    Intermediate Core: YTD: 3.27%, 5 year 3.22%
    Intermediate Core Plus: YTD 1.17%, 5 year 3.15%
    Multisector: YTD -6.61%, 5 year 2.13%
    High Yield: YTD -9.98%, 5 year 2.09%
    Agree. This year Multisector bonds lag the Intermediate core bonds by ~10%, indicating flight to safety.
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