3 / 5 Stars
3 3 1 4 1
Zacks Investment Research
Standard & Poor's
U.S. News evaluated 36 Commodities Broad Basket Funds. Our list highlights the top-rated funds for long-term investors based on the ratings of leading fund industry researchers.
Note: Profile written for different share class.
The fund has returned 10.10 percent over the past year, -4.66 percent over the past three years, and 5.47 percent over the past five years.
|Trailing Returns||Updated 06.30.2014|
|Year to date||9.5%|
|3 Years (Annualized)||-4.7%|
|5 Years (Annualized)||5.5%|
|10 Years (Annualized)||2.1%|
Management at PIMCO Commodity Real Return Strategy fund employs a two-fold strategy. To provide for real returns, which factor in inflation, management invests in high-quality bonds—mostly Treasury inflation-protected securities, or TIPS—and commodity futures to gain exposure to a broad range of holdings in the commodity markets without directly investing in tangible commodities.
As of July 03, 2014, the fund has assets totaling $14.36 billion. Its portfolio consists primarily of investments in commodity futures and TIPS.
The fund is unlike a typical fund that invests in physical commodities, and its returns will not mirror those of funds that are actually invested in the commodities market. "We're investing in commodities futures," says manager Mihir Worah. During the financial downturn, the fund performed better than funds that hold stocks of commodity producers, but it wasn't able to outperform its benchmark because of its relatively large share of fixed-income holdings. The same TIPS-heavy fixed-income portfolio that slowed the fund's returns during the downturn outperformed its benchmark (the Dow Jones-UBS Commodity Index) by more than 20 percent in 2009. Since then, the fund has cooled off quite a bit, but its streak of outperformance has nonetheless continued. The fund has returned 10.10 percent over the past year and -4.66 percent over the past three years.
Since management uses derivatives to gain commodities exposure, there is room left over for investments in fixed-income holdings like TIPS, according to Morningstar. Investors seeking a purely commodity-focused strategy should look elsewhere because of the fund's dual investment strategies. "We call it the double real fund because it has two levels of inflation protection—one from the commodities and the second from the TIPS," Worah says. Morningstar notes that exchange-traded funds focused on commodities can also present cheaper alternatives. The fund has returned 5.47 percent over the past five years.
The fund's prospectus says, "The fund seeks to achieve its investment objective by investing under normal circumstances in commodity-linked derivative instruments backed by a portfolio of inflation-indexed securities and other fixed-income instruments." The fund is classified as nondiversified, which allows management to invest in a smaller number of options than a typical diversified fund, according to the fund's prospectus.
Role in Portfolio
Morningstar assigns the fund a "specialty" role in portfolio.
Mihir Worah became lead manager for the fund in 2008, replacing John Brynjolfsson, who had run the fund since its 2002 inception.
PIMCO Commodity Real Return Strategy Fund has an expense ratio of 1.94 percent.
The fund is unique in that it doesn't invest directly in commodities and its TIPS portfolio makes for added interest-rate risk for investors, according to Morningstar.