The U.S. Patent and Trademark Office has awarded Pimco
] a patent for the technique behind its Global Advantage Bond Index
, which is weighted based on countries' GDPs.
was awarded to Bill Gross
and global co-head of emerging markets portfolio management Ramin Toloui
on November 6 and announced today in a Pimco press release
. The index
weights each of five regions of the world based on its share of world GDP rather than its market capitalization -- so that, for instance, as emerging markets countries capture a larger share of world GDP, the index will hold a greater proportion of bonds from those countries.
"Pimco's goal in designing a new bond index was to provide investors with a superior compass to guide their portfolios in a New Normal environment where economic and financial power is shifting from developed to emerging markets," Toloui is quoted as saying in the Pimco press release.
Gross and Toloui filed the patent in November 2008. The filing says that the index is weighted on GDP rather than market cap because market cap-based weighting "tends to provide a 'backward' look at where economic markets were in the past rather than where they will be in the future."
The Pimco press release is below.
PIMCO Granted U.S. Patent for Global Advantage Bond Index Methodology
Intellectual Property Protection Underscores PIMCO's Focus on Delivering Innovative Solutions to Help Investors Navigate a New Normal Investment Landscape
NEWPORT BEACH, CA--(Marketwire - Dec 4, 2012) - PIMCO, a leading global investment management firm, has been granted a patent by the U.S. Patent and Trademark Office for the methodology behind the firm's Global Advantage Bond Index (GLADI).
GLADI is an innovative fixed income benchmark designed to better capture investment opportunities in a New Normal investment landscape. It is also an example of PIMCO's focus on delivering responsive global solutions to help investors meet their return and risk management goals.
U.S. Patent Number 8,306,892 was awarded to PIMCO founder and Co-Chief Investment Officer Bill Gross and Ramin Toloui, the firm's Global Co-Head of Emerging Markets Portfolio Management, as inventors of GLADI's unique index construction methodology. The methodology is designed to capture the ongoing transformations in global bond markets -- in particular the shifting economic weight from developed countries to emerging markets -- by assigning more appropriate portfolio weights rather than using a backward-looking, market-capitalization weighting common to most global bond indexes.
The GDP weighting approach is intended to help investors to gain a first-mover advantage by positioning portfolios in markets that are underrepresented in traditional indexes. GDP weighting also helps investors avoid the biases embedded in market capitalization-weighted indexes that concentrate large weights in the most highly indebted countries. In addition, GLADI makes fuller use of the global fixed income opportunity set, incorporating both nominal and inflation-linked securities.
"PIMCO's goal in designing a new bond index was to provide investors with a superior compass to guide their portfolios in a New Normal environment where economic and financial power is shifting from developed to emerging markets," said Mr. Toloui. "Ultimately, we think the Global Advantage Bond Index enhances investors' ability to target improved risk-adjusted returns, and we are gratified that our work has been recognized with a U.S. patent."
GLOBAL ADVANTAGE and GLADI are trademarks of Pacific Investment Management Company LLC.
PIMCO is a leading global investment management firm, with offices in 11 countries throughout North America, Europe and Asia. Founded in 1971, PIMCO offers a wide range of innovative solutions to help millions of investors worldwide meet their needs. Our goal is to provide attractive returns while maintaining a strong culture of risk management and long-term discipline. PIMCO is owned by Allianz S.E., a leading global diversified financial services provider.
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