NEWPORT BEACH, Calif., Aug. 12, 2002 (PRIMEZONE) -- Fund managers at PIMCO, one of the world's leading authorities on fixed income investments, believe economic and political trends should bolster the market for inflation-protection bonds during the next three-to-five-year period.
Inflation-protection bonds, or TIPS (Treasury Inflation Protection Securities), are bonds offered by the government to help investors protect against inflation. The securities pay a fixed interest rate, but the principal value fluctuates with changes in the Consumer Price Index (CPI); if inflation rises, so does the principal value and interest income provided by TIPS.
"Central banks around the world, hoping to avoid the experience of Japan, will be focused on preventing deflation, rather than inflation," said PIMCO Executive Vice President John Brynjolfsson, who oversees the PIMCO Real Return Bond Fund, one of the nation's largest TIPS mutual funds. "Furthermore, government spending and deficits are increasing. As a result, PIMCO believes the most likely scenario is for a period of re-inflation, though we don't expect inflation to exceed 4 percent over the next three to five years."
Brynjolfsson noted that TIPS also provide diversification, even in a low-inflation environment. There is also a chance that continuing economic problems associated with the recent U.S. economic downturn, an exodus of foreign capital from U.S. markets, and an expected flood of inexpensive Chinese exports could combine to keep inflationary pressures low.
PIMCO's Real Return Fund has provided attractive returns in recent years, despite the near absence of inflation, mainly by adjusting the weighting of TIPS bonds in its overall portfolio, and by managing the duration of the TIPS bonds in which it invests.
Brynjolfsson is an expert on the subject of TIPS and co-edited, "The Handbook of Inflation-Indexed Bonds." Morningstar has awarded the Real Return fund five stars -- its highest ranking -- for both three-year and five-year performance.
The Real Return Fund is among a suite of products that address investors' needs for diversification beyond traditional equities and nominal bonds. PIMCO's other "real return" offerings -- so named because they are designed to provide steady returns even after the effect of inflation is taken into account -- also include exposure to commodity indexes as well as a highly diversified fund of funds.
PIMCO considers such investments an important part of a diversified portfolio. The company recently hired Bob Greer, who has several years of experience with such investments, to be its real return product manager. In that role, Greer serves as liaison between real return portfolio managers and the company's account managers, thus ensuring that PIMCO clients' needs are best served.
Disclosures
With more than $270 billion (as of June 30, 2002) in fixed-income assets under management in the US, PIMCO is one of the world's leading fixed-income fund-management companies. Founded in 1971 and based in Newport Beach, California, the company is majority owned by Munich-based Allianz AG, a leading global insurance, and financial services holding company with nearly $1 trillion in assets and represented in 70 countries around the globe.
Past performance is no guarantee of future results. Investment return will fluctuate and the value of an investor's shares will fluctuate and may be worth more or less than their original cost when redeemed. The MOP returns take into account the 3% maximum initial sales charge. The performance figures reflect the total return performance of the PIMCO Real Return Fund A shares class (after expenses) as compared to Lehman Global Real: U.S. TIPS, an unmanaged market index made up of U.S. Treasury Inflation Linked Indexed securities. It is not possible to invest directly in an unmanaged market index. The Index does not take into account sales charges.
Average Annual Total Return (as of 6/30/02)
1 Year 5 Year 10 Year Since Inception
Jan 27, 1997
PIMCO Real Return Fund
Institutional (after fees) 9.01% 8.75% -- 8.26%
PIMCO Real Return Fund
Class A Shares (MOP) 5.28% 7.64% -- 7.22%
Lehman Global Real:
U.S. TIPS Index 8.81% 7.45% --
Diversification does not ensure against loss. Please call or write for a current PIMCO Fund prospectus containing more complete information including management fees, expenses and risks. Please read it carefully before investing or sending money. An investment in a (the) fund is not a deposit of a bank and is not guaranteed or insured by the Federal Deposit Insurance Corporation or any other government agency. In addition, it is possible to lose money on investments in a (the) fund. PIMCO Funds Distributors LLC, member NASD, 840 Newport Center Drive, Newport Beach, CA 92660, www.pimcofunds.com, (800) 927-4678.
Past rankings are no guarantee of future rankings. For each fund with at least a three-year history, Morningstar calculates a Morningstar Rating (based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a fund's monthly performance (including the effects of sales charges, loads, and redemption fees), placing more emphasis on downward variations and rewarding consistent performance. The top 10% of funds in each category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars and the bottom 10% receive 1 star. (Each share class is counted as a fraction of one fund within this scale and rated separately, which may cause slight variations in the distribution percentages.) The Overall Morningstar Rating for a fund is derived from a weighted average of the performance figures associated with its three-, five- and ten-year (if applicable) Morningstar Rating metrics. The PIMCO Real Return Fund was rated against the following numbers of U.S.-domiciled intermediate term bond funds over the following time periods: 504 intermediate term bond funds in the last three years and 386 intermediate term bond funds in the last five years. With respect to these intermediate term bond funds, The PIMCO Real Return Fund received a Morningstar Rating of five stars for the three-year, five-year and overall periods, respectively. Morningstar Rating is for the A share class only; other classes may have different performance characteristics.
Treasury Inflation Protected Securities (TIPS) are guaranteed by the US government, however the shares of the Fund are not. Inflation indexed bonds principal value adjusts to the rate of inflation. If the index measuring inflation falls, the principal value of the inflation-indexed bonds will be adjusted downward, and consequently the interest payable on these securities will be reduced.
The Consumer Price Index is an unmanaged index representing the rate of inflation of the US consumer prices as determined by the US Department of Labor Statistics. There can be no guarantee that the CPI or other indexes will reflect the exact level of inflation at any given time.
Mr. Brynjolfsson is the manager of the PIMCO Real Return Fund, which may invest up to 20% in foreign securities, which may entail greater risk due to foreign economic and political developments. This Fund may invest up to 10% in high-yield securities, lower-rated securities generally involves greater risk to principal than investment in higher-rated securities. There is no assurance that the private guarantors or insurers will meet their obligations. As of 6/30/02, the PIMCO Real Return Fund had $4.4 billion in assets.
Except for the historical information and discussions contained herein, statements contained in this news release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may involve a number of risks, uncertainties and other factors that could cause actual results to differ materially, including the performance of financial markets, the investment performance of PIMCO's sponsored investment products and separately managed accounts, general economic conditions, future acquisitions, competitive conditions and government regulations, including changes in tax laws. Readers should carefully consider such factors. Further, such forward-looking statements speak only on the date at which such statements are made. PIMCO undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.