PIMCO’s New Institutional Interval Fund

PIMCO Flexible Credit Income Fund, an interval fund seeking to raise $1 billion, went effective last week.

The Fund’s strategy is true to its name:  flexible asset allocation across a wide variety of global credit sectors including, corporate , mortgage, consumer, emerging market, and municipal credit.  PIMCO will shift the allocation based on market conditions, valuation assessments, economic outlook, credit market trends , and other economic factors.

According to the Prospectus:

  • The Fund may invest up to 40% of its total assets in securities of issuers economically tied to “emerging market” countries other than investments in investment grade sovereign debt, where as noted above there is no limit.
  • As a matter of fundamental policy, the Fund will normally invest at least 25% of its total assets (i.e., concentrate) in mortgage-related assets issued by government agencies or other governmental entities or by private originators or issuers.
  • The Fund may invest up to 20% of its total assets in common stocks, common shares of other investment companies, such as open-end or closed-end management investment companies and exchange-traded funds, and equity securities of real estate investment trusts.

The management fee will be 1.30% of total managed assets.  PIMCO expects to enter into an expense limitation agreement with the Fund through 2018.

The Fund will add leverage to its portfolio buy using reverse repo agreements,, credit default swaps, dollar rolls, and borrowing via bank loans, commercial paper, and/or other credit facilities.  Initial leverage is expected to be approximately 30% of the Fund’s assets.

The Flexible Credit Income Fund is offering one Institutional Class of shares, and the minimum investment is $1 million.  There will be no sales load, but there is a 2.0% repurchase fee for redemptions within one year of purchase.

As of December 31, 2016, PIMCO had approximately $1.46 trillion in assets under management.

 

For more information on Interval Funds raising capital and in registration, see Tools and Data