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Wednesday, July 01, 2009

Gross Urges Investors To Trim The Fat

News summary by MFWire's editors

The latest monthly outlook from Pimco’s Bill Gross offers continued advice on adjusting to the ‘new normal’ and urges the use of bond-based investing. The piece coincides with the launch of the Pimco MuniGO Fund, which will feature high-quality municipal bonds in an actively managed portfolio.

Pimco claims that the new fund will be the first 40 Act product to offer intermediate maturity general obligation bonds from top-rated municipal issuers alongside pre-refunded Treasury-backed municipal bonds.

Meanwhile, in the latest installment of his monthly market outlook (titled “’Bon’ or ‘Non’ Appetit?”), Pimco's Bill Gross continued last month’s theme of establishing a “new normal” for investors. Gross employs a obesity/starvation theme to underscore investors' near addiction to a “constant diet of asset appreciation” and a resulting gluttony of overconsumption of goods and credit. In doing so, the bond-firm giant’s head managed to get in some plugs for the secure income offered by bonds and stable-dividend paying equities -- noting that investors need to get used to this moderate form of investment and avoid the feast/famine risk cycle of stocks, high yield bonds and commercial and residential real estate.

Company Press Release

NEWPORT BEACH, CA --(July 01, 2009) - PIMCO, a leading investment management firm, has launched the PIMCO MuniGO Fund, which will focus on the highest-quality municipal bonds in an actively managed portfolio designed to offer attractive tax-exempt returns. MuniGO is the first mutual fund to offer investors a portfolio of intermediate maturity general obligation bonds from top-rated municipal issuers, as well as pre-refunded municipal bonds backed by U.S. Treasury and Agency securities. The fund is managed by PIMCO Executive Vice President John Cummings, who heads the firm's municipal bond trading desk.

Increasing U.S. government indebtedness, along with rising costs for healthcare and education, are threatening to force an increase in marginal tax rates for most investors in the years to come. This means investors may benefit from investment solutions that employ municipal bonds, which are among the most effective tools for earning income that is exempt from federal, and in some cases, state income tax. Yet investing in the municipal market requires credit skills and market reach due to ongoing dislocations in financial markets and the many challenges that state and local governments face. "More than ever, municipal bonds are crucial for a wide array of portfolios, as investors face the potential for higher taxes and elevated risks across the financial markets," said Mr. Cummings, portfolio manager for the fund. "MuniGO taps into the many strengths of PIMCO -- including credit and yield curve analysis, portfolio construction and trade execution -- to offer a unique fund that will focus on the highest-quality sectors of the municipal market."

The MuniGO Fund aims to outperform its benchmark, the Barclays Capital Municipal GO Bond Index, through active management of a portfolio of municipal bonds, specifically high-quality general obligation bonds and pre-refunded bonds backed by U.S. Treasury and Agency securities. Relative to individually constructed laddered municipal bond portfolios, the fund aims to generate attractive returns through PIMCO's proven security selection and trade execution capabilities. Investors may also benefit from the daily liquidity of a mutual fund structure.

Institutional shares of the MuniGO Fund trade with the ticker PMGOX. Shares carrying an upfront fee (A shares) trade with the ticker APNAX, "C" shares trade with the ticker APNCX, and no-load "D" shares trade with the ticker APNDX. 

Edited by: Meredith Mazzilli

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