Fixed interest manager PIMCO has changed the investment parameters of the PIMCO EQT Australian Focus Fund, allowing it to lower duration in the portfolio to zero.
During periods of heightened nervousness, the PIMCO EQT Australian Focus Fund can now move to be 100 per cent invested in cash, said Harvey Kalman, head of EQT corporate fiduciary & financial services.
“Investors want an attractive return but they’re also seeking to preserve their capital, which are the two main objectives of this fund,” he said.
“We are making active decisions around asset allocation and we’re managing the interest rate cycle and other risks to deliver the highest level of income we can. From time to time, that may mean moving to cash.”
According to Kalman, enhancements to the PIMCO EQT Australian Focus Fund made it an even more compelling alternative to bank term deposits.
He said investors and advisers were demanding products that have the flexibility and skill to invest in shorter duration, high quality fixed-interest securities which offer yields higher than cash with low volatility.
“Transitioning investors successfully from bank term deposits requires a thoughtful approach,” he said. “While these investors want an attractive return, many are also seeking to preserve their capital. They want fixed-interest investment approaches that can manage risks while offering liquidity, yield and capital stability.”
The PIMCO EQT Australian Focus Fund aims to outperform its benchmark, which is a combination of cash and the UBS Composite Bond Index, by 1 per cent over a rolling three-to-five-year time horizon.
Peter Dorrian, head of global wealth management, PIMCO Australia said the manager was not suggesting investors pull all their money out of term deposits. “If investors are concerned about holding long-dated term deposits and locking money away for extended periods of time at a low rate, then this is an alternative because we manage the interest rate risk in the portfolio,” he said.
