Video Reports

Embed this video

Copy Code

Link to this video

Get LinkEmbedLicenseRecommend (-)Print
Bookmark and Share

By Eric Jacobson | 01-26-2016 10:00 AM

Preserving Capital in a Central-Bank-Dominated World

PIMCO's Jerome Schneider, our Fixed-Income Fund Manager of the Year, thinks a blended approach to risk and income, with a special emphasis on liquidity, can help boost returns.

Eric Jacobson: Hi, this is Eric Jacobson. I'm here from Morningstar with Jerome Schneider--he is Morningstar's Fixed-Income Fund Manager of the Year. We're going to talk to him a little bit today about the short-term funds that he runs, including PIMCO Short-Term Bond Fund (PTSHX), which is the main product that he operates.

Jerome, thank you so much for coming and meeting with us today.

Jerome Schneider: Thanks very much, Eric. It's honor to be here, and we appreciate the honor that you've bestowed upon us this year.

Jacobson: Congratulations.

Schneider: Thank you.

Jacobson: So, tell us a little bit, just for starters, about what makes the way that PIMCO runs short-term money a little bit different from the more plain-vanilla options that we are familiar with out there.

Schneider: Absolutely. First of all, cash management is at the forefront of most people's mind, especially with all the volatility in the broader markets these days. The way we really think about it--starting with the macro and the macroeconomic themes--it's very important now, more than ever, to be really encapsulating in your investment thesis what's going on with differentiating global central-bank policies. Long story short: In the past, front-end people used to just simply focus on what the Fed was doing; but ever since the global financial crisis, we've really had to think about the global effects of things like quantitative easing--not just from the Fed but other central banks globally.

As we entered 2014 and on to 2015, it became increasingly apparent that global central-bank policies were going to become very divergent, and we had to think about that in two prospects. One, what does that mean in terms of protecting one's capital? And two, specifically for U.S. investors who are already facing a near-zero-rate environment, how do we help protect capital and produce some return?

So, for us at PIMCO, we're always focused on those macroeconomic conditions. For us on the front end--specifically the short-term franchise--we need to be specifically focused on it to understand what the Fed's going to do and take advantage of those opportunities as they percolate globally. For us, that's really the focal point, which differentiates us. We've had a short-term franchise for many, many years--decades, in fact. The short-term fund's been around for almost three decades. And that's one pillar of what we do in the front-end franchise. But more importantly, focusing on capital preservation isn't simply about earning zero or earning a small amount of nominal return. It's about having degrees of freedom, diversifying your risk, diversifying your sources of liquidity, and ultimately hopefully producing some positive returns both in a nominal sense and also in inflation-adjusted terms for your clients.

Read Full Transcript
{0}-{1} of {2} Comments
{0}-{1} of {2} Comment
  • This post has been reported.
  • Comment removed for violation of Terms of Use ({0})
    Please create a username to comment on this article