PIMCO’s actively managed bond funds continue to outperform both local and global equities though market conditions are set to become challenging for fixed interest as the world economy recovery post GFC gathers pace.

As the market anticipates growth in the US in particular, PIMCO believes short-term rates are set to rise in the global developed world in 2012 with spikes already evident in long-term rates. However, PIMCO believes the changing climate provides scope for active managers to demonstrate their value and act as both an income generator and stabiliser for portfolios.

Peter Dorrian, Head of Global Wealth Management at PIMCO, said actively managed bonds will continue to produce steady returns to income conscious investors in a challenging environment.

“The need for bonds remains essential as the risk rally is likely to run out of steam mid-year,” he said.

“We believe fixed interest has a place in every portfolio, regardless of the economic environment. All investors should retain exposure to the asset class as a diversifier and as an important means of lowering overall portfolio volatility,” Mr Dorrian said.

The PIMCO Australian Bond Fund has continued to perform strongly, outperforming the Australian share market by almost eight per cent as measured by the ASX 200 over calendar 2010. The fund also outperformed over three and five year periods.

The outperformance of PIMCO’s bond funds has also included global markets. The EQT PIMCO Global Bond Fund outperformed the Australian share market over one, two, three and five year periods including a 15.67% return in calendar 2010.

“Over a five-year period, PIMCO’s Australian and global bond funds have comprehensively outperformed the ASX 200. The results show bonds can outperform equities with less volatility,” Mr Dorrian said.

While past returns are no guarantee of future returns, funds such as the Australian Bond Fund and Diversified Fixed Income Fund should continue to provide value for investors.

“In difficult investment environments, active management of fixed interest can help ensure clients’ funds are more effectively administered through superior macroeconomic forecasting, adjusting portfolio duration and strong credit analysis capabilities,” he said.

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