Home > Resources > Video Library > Quick Takes: Can De-Risking Portfolios Support Returns Too?
Investment Strategies

Quick Takes: Can De-Risking Portfolios Support Returns Too?

For investors looking to earn income and de-risk portfolios, short-term investments may be an attractive opportunity. Portfolio manager Jerome Schneider discusses why an allocation to the asset class should be more than an afterthought.

More from this section

Read Transcript

Text on screen: Quick Takes - Can de-risking portfolios support returns too?

Jerome Schneider, Head of Short-term Portfolio Strategies: My name is Jerome Schneider, head of the short-term portfolio strategies here at PIMCO.

For investors, the past few months have been quite volatile and as a result, many investors are looking to de-risk their portfolios.

Chart: A line chart illustrates the up and down fluctuations of the U.S. 2 year/10 year yield curve from 1989 to 2019. A mountain chart that illustrates the growth in money market assets under management for the same period underlays the line chart.

We’ve seen an increase of over 300 billion dollars of assets, specifically into traditional money market funds as a result over the past year.

In fact, the curve has flattened tremendously between the two-year and the ten-year note.

What investors don’t understand is that they actually might stay in these money market funds strategies much longer than they had typically expected.

And so, for investors looking to earn a little bit more income, the front of the yield curve offers traditional opportunities that we haven’t seen for quite a while

Chart: A bar chart depicts decreasing yield, quarter over quarter, from December 2017 to March 2019 relative to a second bar chart which shows a greater decrease in yield, quarter over quarter, from December 2015 to March 2019.

simply because they’re taking less interest rate risk than the longer end of the yield curve, but earning approximately the same yield.

The current environment has created a unique opportunity for the short-term universe.

Chart: A bar chart depicts decreasing yield, quarter over quarter, from December 2017 to March 2019 relative to a second bar chart which shows a greater decrease in yield, quarter over quarter, from December 2015 to March 2019. The area at the front end of the curve is highlighted.

Significantly higher yield potential than just three years ago, with considerably less duration risk than the longer end of the yield curve.

Investors need to be focused on active management possibilities for that de-risking portfolio.

Traditionally, investors have simply looked at the yield and sought to achieve some type of de-risked return.

But really, the focus of the opportunity these days is on total return; the composition of income plus opportunities for capital appreciation along the way.

Chart: A single bar graph depicts a sample bond total return (3%), capital appreciation (0.5%) and yield (2.5%).

That total return produces incremental opportunities.

So, for us, active management is a clear differentiator for investors who want to be thinking about preserving liquidity, maintaining capital preservation, defending themselves against market volatility, and also having some income along the way.

So, at this point in time, these strategies are effectively not just an afterthought, but an actual active allocation to your portfolio strategy.

Given the flat yield curve, given the opportunity for total return, this is an opportunity in the uncertain environment that is potentially ahead of us.

For more information, visit pimco.com

Disclosure


All investments contain risk and may lose value. Investing in the bond market is subject to risks, including market, interest rate, issuer, credit, inflation risk, and liquidity risk. The value of most bonds and bond strategies are impacted by changes in interest rates. Bonds and bond strategies with longer durations tend to be more sensitive and volatile than those with shorter durations; bond prices generally fall as interest rates rise, and low interest rate environments increase this risk. Reductions in bond counterparty capacity may contribute to decreased market liquidity and increased price volatility. Bond investments may be worth more or less than the original cost when redeemed. Management risk is the risk that the investment techniques and risk analyses applied by an investment manager will not produce the desired results, and that certain policies or developments may affect the investment techniques available to the manager in connection with managing the strategy.

There is no guarantee that these investment strategies will work under all market conditions or are suitable for all investors and each investor should evaluate their ability to invest long-term, especially during periods of downturn in the market. Investors should consult their investment professional prior to making an investment decision.

This material contains the opinions of the manager and such opinions are subject to change without notice. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

CMR2019-0501-394179

Filters: Reset All

Filters

Close Filters Dropdown

  • Tags

    Reset

    Close

  • Category

    Reset

    Bond by Bond
    Careers
    Economic and Market Commentary
    Investment Strategies
    PIMCO Foundation
    PIMCO Education
    View from the Investment Committee
    View From the Trade Floor
    Viewpoints
    Education
    Close

  • Order By

    Reset

    Alphabetical
    Most Recent
    Close
() filters applied

Multimedia Finder

Filter By:
  • Bond by Bond
  • Careers
  • Economic and Market Commentary
  • Investment Strategies
  • PIMCO Foundation
  • PIMCO Education
  • View from the Investment Committee
  • View From the Trade Floor
  • Viewpoints
  • Understanding Investing
  • A
  • B
  • C
  • D
  • E
  • F
  • G
  • H
  • I
  • K
  • M
  • N
  • P
  • Q
  • R
  • S
  • T
  • W
  • Z
Clear
Berdibek Ahmedov
Product Strategist, Equities and Multi-Asset
Joshua Anderson
Portfolio Manager, Income and Asset-Backed Securities
Del Anderson
Credit Analyst
Robert Arnott
Founder and Chairman, Research Affiliates
Andrew Balls
CIO Global Fixed Income
Justin Blesy
Asset Allocation Strategist
Meredith Block
ESG Research Analyst
Philippe Bodereau
Portfolio Manager, Head, Credit Research Europe
Allison Boxer
Economist
David L. Braun
Portfolio Manager
Jelle Brons
Portfolio Manager, Global and U.S. Investment Grade Credit
Nathaniel Brown
Director of the PIMCO Foundation
Erin Browne
Portfolio Manager, Multi-Asset Strategies
Esteban Burbano
Fixed Income Strategist
Grover Burthey
Portfolio Manager, ESG
Libby Cantrill
U.S. Public Policy
Kenneth Chambers
Fixed Income Strategist
Stephen Chang
Portfolio Manager, Asia
Devin Chen
Portfolio Manager, Commercial Real Estate
Richard Clarida
Global Economic Advisor
Mathieu Clavel
Portfolio Manager, Alternative Credit
Tony Crescenzi
Portfolio Manager, Market Strategist
Josh Davis
Global Head of Risk Management
Laura Deneke
Sr. Vice President, Product Strategist
Pramol Dhawan
Portfolio Manager
Devin Ekberg
Senior Consultant, Advisor Education
David Fisher
Co-Head of Strategic Accounts, U.S. Global Wealth Management
David Forgash
Portfolio Manager
Preeyam Gandhi
Strategist
Max Gelb
Product Strategist
Nick Granger
Portfolio Manager, Quantitative Analytics
Adam Gubner
Portfolio Manager, Distressed Debt
Gregory Hall
Head of U.S. Global Wealth Management
Mary Hoppe
Account Manager
Ray Huang
Portfolio Manager, Real Estate
Daniel H. Hyman
Portfolio Manager
Daniel J. Ivascyn
Group Chief Investment Officer
Mark R. Kiesel
CIO Global Credit
Erica Kinsella
Product Strategist, ESG Strategies
Sean Klein
Head of Client Business Strategy – Client Solutions and Analytics
Kristofer Kraus
Portfolio Manager
Nicola Mai
Portfolio Manager, Sovereign Credit Analyst
Raji O. Manasseh
Equity Strategist
Samuel Mary
ESG Research Analyst
Kyle McCarthy
Alternative Credit Strategist
Mohit Mittal
Portfolio Manager, Multi-Sector
Alfred T. Murata
Portfolio Manager, Mortgage Credit
John Murray
Portfolio Manager, Global Private Real Estate
John Nersesian
Head of Advisor Education
Roger Nieves
Rick Pagnani
Head of Insurance-Linked Securities
Sonali Pier
Portfolio Manager, Multi-Sector Credit
Gavin Power
Chief of Sustainable Development and International Affairs
William Quinones
Product Strategist
Lupin Rahman
Portfolio Manager
Graham A. Rennison
Quantitative Portfolio Manager
Libby Rodney
Steve A. Rodosky
Portfolio Manager
Emmanuel Roman
Chief Executive Officer
Steve Sapra
Senior Advisor
Jerome M. Schneider
Portfolio Manager
Marc P. Seidner
CIO Non-traditional Strategies
Emmanuel S. Sharef
Portfolio Manager, Asset Allocation and Multi Real Asset
Greg E. Sharenow
Portfolio Manager, Commodities and Real Assets
Candice Stack
Head of Client Management, Americas
Kimberley Stafford
Global Head of Product Strategy; Responsible for Sustainability Oversight
Cathy Stahl
Global Head of Marketing
Jason R. Steiner
Portfolio Manager, Private Lending and Opportunistic Strategies
Christian Stracke
President, Global Head of Credit Research
Geraldine Sundstrom
Portfolio Manager, Asset Allocation, EMEA
Richard Thaler
Distinguished Service Professor of Economics and Behavioral Science at the University of Chicago's Booth School of Business
Jessica K. Tom
Senior Credit Analyst
François Trausch
CEO and CIO of PIMCO Prime Real Estate
Jerry Tsai
Client Solutions and Analytics
Matt Tuten
Portfolio Manager
Megan Walters
PIMCO Prime Real Estate
Qi Wang
CIO Portfolio Implementation
Jamie Weinstein
Portfolio Manager, Corporate Special Situations
Paul-James White
Portfolio Manager
Tiffany Wilding
Economist
Andrew T. Wittkop
Portfolio Manager, Treasuries, Agencies, Rates
Jerry Woytash
Portfolio Manager, Short-Term Desk
Kirill Zavodov
Portfolio Manager
Seray Incoglu
Portfolio Manager, Commercial Real Estate
Mike Cudzil
Portfolio Manager
Ben Bernanke
Chair, Global Advisory Board
PIMCO
  • Alphabetical
  • Most Recent
Section : Date : Experts :
Reset All
Sustainable Development Goals at PIMCO
Forecast Favors Fixed Income
Positioning Portfolios for 2024
The Hard Truth About Soft Landings
Higher Yields Today Create Opportunity
Specialty Finance: Seize Today’s Compelling Entry Point

Load more results Load {{cCtrl.fetchResults}} more results