A reader asked for my opinion about this fund. This is tough to figure. The fund is mostly comprised of bonds but its benchmark is the EAFE index. It uses leverage to buy futures and uses the remaining cash to buy bonds. According to Yahoo Finance it has about 73% in bonds. I did not find duration info on either Yahoo or Morningstar.
This year the fund is way ahead of EFA and last year it lagged it by 6.8%. I think the bond component is the driver. A good bet on bonds (bet may not be a fair word) and the fund does well, a bad bet and the fund will do poorly. If rates rise, as is usually the case in a Fed tightening cycle, I would think the fund would be hurt.
I think it might be less risky (if done properly which is a big if) to replicate the strategy on your own. An individual bond will go back to par. A fund has no par price it must revert to.
A big difference between this and the PLMDX I looked at the other day is that PIPDX' strategy could be done on your own, and be less risky) PLMDX' strategy is not something that could be captured with any liquidity or breadth of currency. I don't think my bank has Hungarian florint NDFs readily available.
Wikinvest Wire
1 comments:
Thanks Rogers,
One thing I could not figure out is PIPDX has only 2.5% in EFA while it can track a 100% EFA. My guess is that PIPDX uses futures and options to leverage 2.5% into 100%, while leaving 97% for bonds and cash. In a way it resembles a principal protected equity fund, though lower in cost than the competition.
I do respectively disagree with you about individual investors can duplicate PIPDX on their own. The bond portion of PIMCO shows a negative relationship to bonds like VBMFX or LQD.
As with any investment, if the up-trend of PIPDX changes we may need to sell it,even it was a good investment in the past.
Thanks again for spending time on this.
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