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Municipal Intermediate Value Managed Account

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Strategy Overview

Highlights

Focuses on generating premium income and excess total return over traditional intermediate term municipal ladders* while seeking to maintain a high level of capital preservation

Aims to capitalize on muni market inefficiencies by leveraging credit and quantitative research to identify mispricings in investment grade municipals

Uses an “enhanced ladder” structure strategically comprised of both 1 – 8 year bullet bonds and callable bonds with maturities extending out to 15 years in an effort to generate structural alpha and capture incremental yield

Strives to maximize the tax-efficiency of portfolios through a systematic tax loss harvesting process, a cautious approach to portfolio turnover, and the option of National, California, or New York state-specification

Leverages our specialized separately managed accounts (SMA) team, which seeks to provide best-in-class service tailored to the needs of SMA clients

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Process & Philosophy

Investment Process

Utilizing our disciplined investment research process, PIMCO aims to uncover value and protect principal in clients’ municipal investment portfolios through comprehensive credit and quantitative research. Leveraging our quantitative research to calculate what we believe are more accurate valuations of non-standard (e.g., callable) security structures, we identify attractive investment opportunities. By way of holistic fundamental credit research, we also aim to select securities possessing underlying credit strength that may be misaligned with market perception, positioning us to capture alpha while mitigating downside risk.

Municipal Bond Philosophy

Taking a 360-degree view, we seek to maximize tax-efficient income and help preserve principal by investing in high quality municipal bonds. Our muni experts identify opportunities and potential risks in the municipal bond market using fundamental bottom-up analysis informed by PIMCO’s top-down global macroeconomic outlook. By applying institutional discipline to a muni market traditionally comprised of smaller investors, we believe our muni platform is distinctly positioned to capitalize on market inefficiencies to unlock potential in clients’ muni portfolios. Supported by our specialized team of muni SMA experts, our muni SMA clients may additionally benefit from our belief that individual clients should receive individualized service.

Portfolio Construction

This “enhanced ladder” strategy targets premium income by identifying attractive municipal bonds that others may have overlooked due to structural pricing inefficiencies. Intermediate Value separately managed accounts are comprised of high quality callable municipal bonds with maturities extending out to 15 years, with the remaining portion of the portfolio composed of investment grade 1 – 8 year municipal bullet bonds. The Municipal Intermediate Value strategy utilizes a proprietary interest rate and pricing model to provide what we believe are more accurate valuations of callable bonds, enabling the strategy to outperform a standard intermediate-term ladder without a significant increase in volatility. Through a disciplined, active sell approach when maturities fall below one year, Intermediate Value aims to deliver consistent outperformance relative to a hold to maturity strategy.

Disclosures

*The proxy for a traditional intermediate-term ladder is a simulated 0-10 year non-callable laddered municipal portfolio. This hypothetical intermediate-term simulated portfolio is comprised of 1- non-callable, AA-MMD priced bonds with a 5% coupon. The bonds are evenly spaced out by 1 year to maturity, beginning at year 1, and assumes reinvestment at redemption into the 10-year rund of the ladder. The simulated portfolio does not represent actual trading and does not reflect the impact that economic and market factors have on management of the portfolio.

Past performance is not a guarantee or a reliable indicator of future results.


The managed account strategies described in this material are offered by Pacific Investment Management Company LLC and are available exclusively through financial professionals. Managed accounts have a minimum asset level and may not be appropriate for all investors. Financial professionals seeking more information should contact their managed accounts department or call their PIMCO representative.


Individual account holdings will vary depending on the size of an account, cash flows and account restrictions. Portfolio holdings are subject to change daily without notice. At any time an individual account managed in this strategy may or may not include securities held by another portfolio. Consequently, any particular account may have portfolio characteristics and performance that differ from another individual account in this strategy.

 

A word about risk:


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. Income from municipal bonds while exempt from federal taxes may be subject to state and local taxes and at times the alternative minimum tax; a strategy concentrating in a single or limited number of states is subject to greater risk of adverse economic conditions and regulatory changes.


The credit quality of a particular security or group of securities does not ensure the stability or safety of an overall portfolio.


PIMCO does not provide legal or tax advice. Please consult your tax and/or legal counsel for specific tax or legal questions and concerns. The discussion herein is general in nature and is provided for informational purposes only. There is no guarantee as to its accuracy or completeness.  Any tax statements contained herein are not intended or written to be used, and cannot be relied upon or used for the purpose of avoiding penalties imposed by the Internal Revenue Service or state and local tax authorities. Individuals should consult their own legal and tax counsel as to matters discussed herein and before entering into any estate planning, trust, investment, retirement, or insurance arrangement.

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

There can be no assurance that the investment approach outlined above will produce the desired results or achieve any particular level of returns. The references to yield targets is not a guarantee, projection, or prediction of future results. There can be no assurance that the opportunities in which the strategy seeks to invest will continue to be available.

PIMCO as a general matter provides services to qualified institutions, financial intermediaries and institutional investors. Individual investors should contact their own financial professional to determine the most appropriate investment options for their financial situation. This material contains the current 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. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission.


Pacific Investment Management Company LLC, 650 Newport Center Drive, Newport Beach, CA 92660 is regulated by the U.S. Securities and Exchange Commission. PIMCO is a trademark of Allianz Asset Management of America LLC in the United States and throughout the world. ©2024, PIMCO.


CMR2023-0828-3085636