Howdy, Stranger!

It looks like you're new here. If you want to get involved, click one of these buttons!

In this Discussion

Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.

    Support MFO

  • Donate through PayPal

Pimco Has A Manager Who Tops Dan Ivascyn. His Name? Dan Ivascyn

edited August 2017 in Fund Discussions
FYI: Investors in Daniel Ivascyn’s Pimco Income Fund have enjoyed stellar returns. Those who put money in his much smaller closed-end fund have gotten those gains on steroids.

PDI: 17.09% YTD
PONAX: 5.62% YTD



  • PDI has indeed been a stellar performer since its IPO. hard to recommend it today though, with such hefty premium. A few more days like yesterday, and it could be a buy again.
  • Highly leveraged with a healthy high yield portfolio. When the bears start to run, those in it will be in a world of hurt. I will stick with my PIMIX/PONAX and sleep better.
  • Yeah, been debating when to sell some PDI; but then someone kind here pointed to cef premiums much higher than PDI's current one :)
  • PCI is still retains a discount although. Narrower than in the past.
    Separate question: Do folks regard PONDX/PIMX/PONAX as a core holding or a high yieldly satellite? Just curious what folks like @junkster, @davidsnowball, @mikem, @oldskeet think?

  • Rightly or wrongly, PONDX is a core holding for me. So far so, what's the next word?
  • HOw much in PONDX? How old are you? If you don't mind me asking?
  • Not at all --- sorry, yes, 70, ~25% of total retirement (if you leave out SS as bond equivalent). Actually some of that is cash, so a little less than a quarter.
  • wait, you didn't tell me the future :)
  • I never know how to define 'core holding', but I guess PONDX is a fund I have faith in (faith in the manager). I'm in it and I tend to stay in it because it is to me the best multisector fund available. I like the adjustments the manager makes, like moving more globally in recent history and shortening duration substantially. And the secret derivative sauce seems to work. I actually might think of a core bond fund as one that stays fairly consistent in it's investments, like MWTRX or DODIX. I don't think PONDX can be classified as such. But if the definition of core becomes a fund you will stick with through thick and thin then, well, in that sense is core for me.

    I have 4 classified bond funds which I own because I'm hoping they are the place to be moving forward through rate hikes and an often talked about shift to global fixed income having better returns in the next 5 to whatever years.

    I own:

    PONDX because of the great management track record and it's flexibility

    PFIDX also has Ivascyn on the team, classified as a low duration floating income fund

    MAINX and PGMSX for the Asia and global sector

    All 4 funds are at about equal percentages. Also have a lot of bond exposure which I can't control within my 2 balanced funds, PRWCX and ICMBX... FWIW

  • edited August 2017
    MikeM2 said:

    PCI is still retains a discount although. Narrower than in the past.
    Separate question: Do folks regard PONDX/PIMX/PONAX as a core holding or a high yieldly satellite? Just curious what folks like @junkster, @davidsnowball, @mikem, @oldskeet think?


    Mike I can't help you because of the short term nature of my methodology. I was in PONDX in 2012 and a few months in early 2013 but not again until this year. Its returns from 2013 through 2016 were not inspiring. Much of this year's returns are from its exposure to rmbs primarily non agency. I read somewhere PIMCO and Ivascyn are buying all the legacy non agency rmbs from before the crash they can get their hands on. I am 55% IOFIX and 45% DPFNX now which is primarily all non agency but with a heck of a lot less AUM. How long this ultra steady rise in that market can continue there I have not a clue. But the strong housing market has helped immensely.
  • Fellas, REALLY, thanks a lot. I appreciate the thoughts. Hope you are all having a GREAT summer.
    BTW besides having PCI/PIMIX/PONDX I have my Mom in DODIX and a couple short term bond funds. In my mental book keeping the Ivacysyn funds occupy a gray zone of risk and stability. We shall see what the future holds. Best, Mike
  • Awhile back I switched from PTTRX to PIMIX in my 401(K). I also invested in EMB and BND.
  • You both might want to look at FSICX at some point.
  • @Sven, I got into PCI/PDI after reading Sam Lee's work at the Morningstar's ETF newsletter. On his blog Sam once noted PIMIX was PIMCO's best fund. That is when I added PIMIX/PONDX to my Mom's account. A little PCI for Mom as well since is was at a wider discount. It occupies part of the risk version of her account. Actually Sam Lee noted PIMIX behaved like a bond fund with a 10-15% stock sleeve so adjust accordingly. Will take a look at FSICX especially std dev.
  • @MikeM2, I will do more research to better understand the leveraged part of PCI. Do you have the link to Sam Lee's article? I searched but no luck so far.
  • edited August 2017
    @sven, check your PM. It was actually a private note. He had written extensively on PCI/PDI during his tenure as editor at the Morningstar ETF newletter.
  • edited August 2017
    fundly said:

    Highly leveraged with a healthy high yield portfolio. When the bears start to run, those in it will be in a world of hurt. I will stick with my PIMIX/PONAX and sleep better.

    Technically (and more from the top of my head than bc I am delving deep into their portfolio), PDI, PCI, and it's PIMCO CEF cousins are mostly NOT high yield funds. They make a lot of their return on smartly-purchased MBS, but also on swaps and derivatives that both hedge their portfolios to swings in interest rates and add to their returns. Look at the performance of their NAVs on days when interest rates rose.

    As far as premiums go, think of PDI as the equivalent of a single bond. (I know I know it's not! Just work with me here....) Would you rather hold a bond that matures in, say, 10 years (I know PDI doesn't mature and return your full par value.....just an exercise), and pays 8% interest along the way (again, I know it's distribution is not fixed like a bond....), or would you rather own a bond with similar maturity that pays 4% interest along the way? Leaving out price of the bond. The yield-starved market is pricing these CEFs that earn 8-10% on their NAV, at premiums, that still allow an ~8.5% distribution (give or take a %) on current price. And yes, prices are volatile compared to their NAVs or to OEFs.

    Just my thoughts. Currently hold PDI, PCI (bought later 2 just yesterday for a small account I help manage), PFN, PTY, PKO, for full disclosure. But I would also like to see their prices decline some so I can purchase more in various accounts. So talking them up defeats that purpose some;)

    Lastly, on the topic of "highly leveraged", is a fund that holds bonds picked by arguably the best bond-picking managers/team around presently, levered up 1.5-to-just-under-2 times, really a bad thing? Plus managed with "the full toolbox" available to bond managers today--hedges, swaps, derivatives, so dampen the effects of macro interest moves. mREITs are often levered up multiples of that and generally much less diversified in their holdings.

    Finally, and yes, then I'll get off my proselytizing soapbox, for those who worry about asset gathering and forced redemptions, these CEFs do not deal with that, as success leads to investors purchasing the fund, driving up the premium perhaps. Conversely, sales do not force the managers to sell to meet redemptions. These are $1-2 billion-sized Ivascyn funds (best of ideas maybe? Or at least able to invest across the spectrum of holding sizes/availabilities). Imagine investing in PONDX/PIMIX when it was only this size.....
  • Good stuff @Graust.
  • IMHO and those of others 42.5% leverage is highly leveraged. Maximum allowed is 50% as per the Investment Company Regulation act of 1940 and the median amount of leverage for cef's is about 33%. My post was to highlight the fact that in a financial downturn this leverage will still require payment on the debt ,which will cause increased shareholder loss. In addition ,losses will be magnified by the leverage with interest rate declines, especially in the longer maturity securities. The 26% of fund holdings in MBS in PDI is of the non agency variety ie subprime with higher yields. In a downturn when folks are running to the exits this fund will likely have liquidity issues/problems. I do own CEF's and know about the potential downsides. Sugarcoating PDI does not do it justice. PONDXPIMIX is a buy and hold fund and PDI is not, IMHO. I own PIMIX as a satellite fund in my portfolio and sleep well with it there
  • Thanks; you make it sound more like one of these:

  • @fundly I get your (excellent) points about how leverage and subprime holdings could hammer PDI if there's a downturn. It is indeed a risky animal in many ways. Investors have to be confident that the management will continue to manage those risks well.

    But I don't see how or PDI or any CEF could have liquidity issues. Some of the markets in which it invests might. Those subprime bonds could certainly enter into a free fall under certain conditions. But PDI itself? It never has to sell its holdings to meet redemptions. In terms of liquidity, PIMIX is a bigger risk, no? Or am I understand CEFs wrong? (I don't own any, including PDI.)
  • CEF's have no limit on the amount of illiquid securities they may hold. OEF's are limited to a maximum of 15%. A knowledgeable CEF investor would know this and it would influence increased selling in a downmarket The CEF itself as a unit would have liquidity risk in a downturn based on market demand and other factors. Since a great deal of CEF's are held by small investors there would have to be enough buyers in a downturn to maintain liquidity but in this scenario more sellers would be expected, leading to the liquidity problem. Because PDI holds more illiquid securities than PIMIX and for other multiple reasons, it is much more risky, than PIMIX, and the CEF itself would face liquidity problems. Would PIMCO,s secret sauce lower the risks in a downturn? I personally would not hold my breath. That is also why my PIMIX holding is a satellite one. Fidelity's site has good information on CEF risks.
  • The main difference is that PIMIX is OEF which means price=NAV while CEFs has a price for trading which is not usually equal the NAV(which is what it's worth). In a meltdown, the price can go down very quickly based on trading all day long from buyers and sellers.
    And most CEFs are held by retail investors.
    But, that doesn't mean CEFs are "bad", if you can stand the volatility you can make more money. I would hold CEFs instead of stocks.
    I also want to point out that Ivascyn invests his own money a lot more in PDI+PCI than in PIMIX.
    5 year performance for PDI 18.5% annually...PIMIX 7.8...SPY(SP500) 14.5%. YTD(year to date) PDI 18.2% annually...PIMIX 6.1...SPY(SP500) 11.7%.
  • Thanks @Fundly and @FD1000. Sounds like if a meltdown in PDI does happen, could be worth picking up after.
  • @expatsp Sam Lee would always say to buy CEFs when the discount widens. FWIW PCI is still trading at a small discount. Good hunting.
  • @davidrmoran, MikeM2 is referring to when the % spread between premium/discount becomes larger. My recollection is that the discount of PCI was closed to 10% relative to the NAV, and now it is near a single digit. So it is less attractive for buyers. I am not an experienced CEF trader.
  • Right, but why when it widens, which to me meant (maybe I am misunderstanding) premium getting higher and higher, does that make it more attractive to buy?
Sign In or Register to comment.