Forex to the fore in latest Pimco emerging-markets offering

Full Spectrum fund designed to take currency issues out of the equation for investors

Feb 25, 2013 @ 2:13 pm

By Jason Kephart

Pacific Investment Management Co. LLC launched the Pimco Emerging Markets Full Spectrum Fund (PFSIX) on Monday, making it easier for advisers to get access to all the flavors of emerging market debt.

Pimco already offers the $14 billion Pimco Emerging Local Bond Fund (PELBX), which invests only in emerging-markets bonds denominated in the local currency. The money manager's $7.9 billion Pimco Emerging Markets Bond Fund (PEBIX) invests only in dollar-denominated emerging markets bonds and the $6.8 billion Pimco Emerging Markets Currency Fund (PLMIX) invests solely in emerging-markets currencies.

The Full Spectrum fund will combine the strategies of Pimco's three existing emerging-markets bond funds into one single offering. Portfolio manager Michael Gomez, who also manages the three existing funds, will be able to choose among local currency bonds, dollar-denominated bonds and currencies — depending on where he sees the most opportunity.

“Many fast-growing emerging markets offer investors a range of choices, such as undervalued currencies, attractive yields in local bond markets, the improving credit quality of sovereign debt or the higher yields of corporate bonds, but identifying and capturing the best opportunities requires a dynamic asset allocation framework and robust risk management,” Mr. Gomez said in a statement.

Emerging-markets bonds exploded in popularity last year thanks to their 4% to 5% yields and improving credit outlook. Assets in the funds rose 60% in 2012 to $80 billion — up from $50 billion — according to Morningstar Inc.

Despite the impressive growth rate, Pimco argues that many investors are still underinvested in emerging markets.

One-third of advisers plan to increase their allocation to emerging-markets debt this year, according to the InvestmentNews 2013 Investment Outlook survey, in which 592 financial advisers participated. Just under half of the advisers surveyed plan to keep their allocations the same this year.

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