PIMCO Low Duration Fund

Scorecard
3 / 5 Stars
Lipper
4 4 5 4 3
Zacks Investment Research
4 (Sell)
Standard & Poor's
2 / 5 Stars
TheStreet.com
C- (Hold)

U.S. News evaluated 122 Short-Term Bond Funds. Our list highlights the top-rated funds for long-term investors based on the ratings of leading fund industry researchers.

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Note: Profile written for different share class.

Performance

The fund has returned -0.55 percent over the past year, 1.73 percent over the past three years, 4.57 percent over the past five years, and 3.07 percent over the past decade.

Trailing Returns Updated 03.31.2014
Year to date 0.2%
1 Year -0.6%
3 Years (Annualized) 1.7%
5 Years (Annualized) 4.6%
10 Years (Annualized) 3.1%

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Summary

Bill Gross runs PIMCO Low Duration fund much as he does the behemoth PIMCO Total Return fund, save one major difference: The fund’s portfolio is primarily made up of short-term bonds.

As of April 22, 2014, the fund has assets totaling $23.58 billion. Its portfolio generally consists of high-quality investments in short-term bonds but also includes some high-yield bonds and foreign investments.

Gross saw the onset of the housing crises before most and steered clear of big losses in asset-backed securities. Recently, agency mortgage-backed securities have made up a large part of the portfolio alongside debt from several battered financial giants, according to Morningstar. In a March filing, management said it's seeking to limit portfolio risk in the midst of global uncertainty. Says management:  "PIMCO will hold high quality [emerging markets] sovereign credits such as Mexico, Brazil, Korea and Russia, which have low levels of debt relative to the size of their economies." Management also says that it will take a modest currency exposure to countries like Brazil, Australia, and Canada because of their sound fiscal situations. The fund has returned -0.55 percent over the past year and 1.73 percent over the past three years.

The fund’s prospectus says the average portfolio duration for its holdings varies from about one to three years, on par with the Merrill Lynch U.S. Treasury 1-3 Year Index (the fund’s benchmark). Gross is known for his wide-ranging investment style. The fund’s prospectus allows for extensive investments in derivatives and other futures trading, which doesn’t involve actually buying bonds but instead holding contracts for future sales. Futures trading will generally show up as large cash holdings for the fund. The fund has returned 4.57 percent over the past five years and 3.07 percent over the past decade.

Investment Strategy

Like all PIMCO funds, management is given a fair amount of leeway. The fund’s prospectus says management will invest “at least 65 percent of its total assets in a diversified portfolio of fixed-income instruments of varying maturities, which may be represented by forwards or derivatives such as options, futures contracts, or swap agreements.” Management also reserves the right to invest all of its assets in derivative instruments or mortgage- or asset-backed securities, according to the fund’s prospectus.

Role in Portfolio

Morningstar assigns the fund a “supporting player” role.

Management

The fund has returned -0.55 percent over the past year, 1.73 percent over the past three years, 4.57 percent over the past five years, and 3.07 percent over the past decade.

Fees

PIMCO Low Duration Fund has an expense ratio of 1.10 percent.

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Risk

Management is given a fair amount of flexibility to invest in a wide range of fixed-income instruments, including the use of derivatives, so it can be hard to track exactly what management is holding at a given time.

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