This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

PIMCO Unconstrained: Betting on Rising Rates

PIMCO Unconstrained has more leeway to maneuver. Late in 2010, the fund lowered its duration close to zero. So if rates rise, the fund may not suffer any losses.

This year, rates have fallen a bit. That has penalized the unconstrained fund. "We were too early," says portfolio manager Chris Dialynas. "We would have been better off if we didn't reduce the duration to zero."

So far this year, the unconstrained fund has returned 1.1%, trailing the PIMCO Total Return at 3.0%. The Barclays benchmark has returned 2.7%.

Not all the strategies of PIMCO Unconstrained have failed. Convinced that bank balance sheets are improving, the fund has been holding bonds from financial companies. That has helped to boost returns. The fund also scored gains with taxable municipal bonds from California.

Despite the mixed showing of PIMCO Unconstrained, investors have poured into the fund. The portfolio has $16 billion in assets, a big showing for a fund that launched less than three years ago. Investors have turned to the fund because they seek protection from rising rates.

No-Load Fund Analyst, a respected newsletter, recommends that investors own both PIMCO Unconstrained and PIMCO Total Return. The newsletter argues that the unconstrained fund should deliver strong returns because it represents PIMCO's best thinking -- without benchmark restraints. If the unconstrained fund is so versatile, why bother with PIMCO Total Return? The newsletter says that holding the two funds together provides some diversification. If the economy suffers a shock and interest rates sink, PIMCO Total Return could provide positive returns. The relatively staid approach of the flagship PIMCO fund could provide the ballast that many portfolios need.

Readers Also Like:

Stan Luxenberg is a freelance writer specializing in mutual funds and investing. He was executive editor of Individual Investor magazine.
2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $118.30 0.42%
FB $104.24 -1.15%
GOOG $742.60 -1.02%
TSLA $230.26 -0.58%
YHOO $33.81 2.64%


Chart of I:DJI
DOW 17,719.92 -78.57 -0.44%
S&P 500 2,080.41 -9.70 -0.46%
NASDAQ 5,108.6660 -18.8590 -0.37%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs