Pimco Taxable Bond Closed End Fund CEF: Corporate, Government, High Yield

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Intro

When it comes to preparation your personal financial retirement, you should focus on the different types of accounts that you can use in which to defer payments or avoid taxes for a little while. However there is only a few people discuss in depth the specific things in which you can invest those funds. One of these investments is investing in bond or fixed income. Bonds or fixed incomes are not your typical high risk-high yield investment but they are very likely to earn a return for you. Bonds will provide regular income to investor through monthly distribution or quarterly distribution. There are essentially two main types of bonds: taxable and municipal. There are two types of taxable bonds such as corporate bonds and government bonds (treasuries). There are two types of corporate bonds such as investment grade corporate bond or high yield corporate bonds. In this article, I will focus on taxable bonds especially PIMCO Taxable Bond Closed End Fund.

A little info about bond

A bond is issued with a specific interest rate. This interest rate is usually called its “coupon rate” because bondholders used to redeem physical coupons in order to collect the interest payments. The bond or debt issuer pays this interest rate at specified intervals such as monthly or quarterly or semi annually. For example, if a $1000 bond is issued with a 6% coupon rate, it pays $60 interest per year, which might be paid in $30 installments every 6 months.

Bonds are rated based on their quality or credit rating. The highest-rated bonds (investment grade bonds) are those with the least risk, and therefore these bonds have lowest yields. The lowest-rated bonds are the so-called “junk bonds” or non investment grade bonds, which offer high returns but come with higher risk.


Bill Gross bought $16.95 millions CEFs

During the last December 2010 period (Dec 13-15, 2010 & Dec 27-28, 2010), Bill Gross bought more than $16.95 millions of these taxable bond CEFs such as government bond, corporate bond, high yield bonds. More details below. Should average investor buy these funds as well?

How to invest in bonds

There are many ways for investor to invest in bonds:

  • Individual bonds
  • Mutual funds
  • Exchange Traded Funds (ETF)
  • Closed End Fund (CEF)

As any typical investment, there is a risk associated with this bond investment. To invest in individual bond, investor may need to do a lot of research about the debt issuer’s condition such as credit rating, entity type, coupon rate, maturity, etc. There is also more risk in this type of investment. Mutual fund, Closed End Funds and Exchange Traded Fund (ETF) investment may provide better alternative for long term investor or trader as well as beginner investor. There is less risk with this type of investment hence the bond fund may consist of many different bonds holding.

PIMCO CEFs

In this article, I’ll focus on fixed income investment in PIMCO taxable bond closed end funds. These CEFs may include government bond, multi sector bond, corporate bonds and high yield bonds. Pacific Investment Management Company, also known as PIMCO, is a well known global investment management company focus on fixed income or bond investment. PIMCO is part of Munich-based insurer Allianz SE. PIMCO is business division of Allianz Global Investors Fund Management.

PIMCO also has 2 very well known Chief Investment Officers (CIO), Bill Gross and Mohamed El-Erian. Bill Gross or William H. Gross is the well known bond guru who also runs PIMCO's $252.2 billion Total Return Fund. The Pimco Total Return Fund has consistently beaten its competitor and outperformed the index.

I like CEFs since the funds are traded like stocks. There is sometimes an opportunity to buy some undervalue CEFs since they can be traded below its Net Asset Value (NAV). The PIMCO Taxable bond CEFs are research through CEFconnect, cefa, and Allianz Investors PIMCO website.

If you are interested in other PIMCO CEFs, please check my other articles:

PIMCO Taxable Bond CEF List

(click column header to sort results)
Fund Name  
Ticker  
Strategy  
Yield  
Market Cap  
Baseline Expense  
Effective Leverage  
Premium / Discount  
Closing Price  
NAV  
PIMCO Income Opportunity
PKO
Multi-Sector
8.19%
$377M
1.40%
44.73%
-1.33%
$25.92
$26.27
PIMCO Global StocksPLUS & Inc
PGP
Multi-Sector
9.77%
$228M
2.30%
44.21%
50.70%
$22.53
$14.95
PIMCO Income Strategy Fund
PFL
Multi-Sector
7.71%
$289M
1.42%
28.94%
4.85%
$11.68
$11.14
PIMCO Income Strategy Fund II
PFN
Multi-Sector
7.83%
$578M
1.35%
27.97%
0.30%
$9.96
$9.93
PIMCO Corporate Income
PCN
Investment Grade
7.99%
$598M
1.47%
36.42%
6.19%
$15.95
$15.02
PIMCO Corporate Opportunity
PTY
Investment Grade
7.97%
$1172M
1.20%
31.56%
7.18%
$17.31
$16.15
PIMCO High Income Fund
PHK
High Yield
11.34%
$1557M
1.14%
28.42%
39.61%
$12.90
$9.24
PIMCO Strategic Global Govt
RCS
Global Income
8.93%
$399M
1.04%
50.77%
2.02%
$10.08
$9.88
PCM Fund
PCM
Mortgage Bond
9.21%
$119M
1.67%
43.97%
3.37%
$10.42
$10.08
Updated: 1/18/2011
PIMCO Income Opportunity Porfolio
PIMCO Income Opportunity Porfolio | Source

A. PIMCO Income Opportunity

PIMCO Income Opportunity fund seeks total return with current income and capital appreciation through investment in global corporate, sovereign, mortgage backed and asset backed debt securities. The fund manager is Daniel J Ivascyn since 2007. The fund has 99.77% of country allocation in USA market. The top 5 sectors of this fund are Banks, Non-Captive Consumer Finance, Non-Captive Diversified Finance, ABS Home Equity and Airlines. The total expense is 1.76% per year which includes 1.40% baseline expense and 0.36% interest expense. As of January 19 2011, the fund sells at-1.33% discount from its NAV (Net Asset Value). There are 440 bonds in its holding currently. Average Duration of the bonds is 9.26 yrs.

B. PIMCO Global StocksPLUS & Income

PIMCO Global StocksPLUS & Income fund seeks to provide income total return and long term capital appreciation through investment in equity index derivative instruments. The indices are based on the S&P500 and MSCI EAFE Indices. An options strategy may be used to achieve its fund’s goal. This CEF is part of Allianz Global Investors Fund Management offerings. The fund manager is Daniel J Ivascyn since 2005. The fund has 95% of country allocation in USA market. The top 5 sectors of this fund are Non-Captive Consumer Finance, Non-Captive Diversified Finance, Banks, Insurance Life and Health Care. There are 320 bonds in its holding currently. The total expense is 2.88% per year which include 2.30% baseline expense and 0.57% interest expense. As of January 19 2011, the fund sells at 50.70% premium from its NAV.

C. PIMCO Income Strategy Fund

PIMCO Income Strategy Fund’s objective is to provide high current income and capital preservation through investment in senior floating rate loans, high yield bonds and other debt securities. The fund manager is Bill Gross since 2009. The Top 5 sectors of this fund are Bank, Non-Captive Consumer Finance, Insurance Life, Airlines, and Non-Captive Diversified Finance. There are 232 bonds in its holding currently. The total expense is 1.46% per year which includes 1.42% baseline expense and 0.04% interest expense. As of January 19 2011, the fund sells at 4.85% premium from its NAV. The bond Average Duration in this fund is 8.63 years.


PIMCO Corporate Income Fund Portfolio
PIMCO Corporate Income Fund Portfolio | Source

D. PIMCO Corporate Income

The PIMCO Corporate Income Fund invests in corporate debt obligations and other corporate income producing securities to provide high current income with capital appreciation. The fund manager is Mark Kiesel since 2005 and Bill Gross since 2009. The Top 5 sectors of this fund are Bank, Non-Captive Consumer Finance, Insurance Life, Other, and Non-Captive Diversified Finance. It has 71.97% of country allocation in global bond market and 27.35% of asset in USA bond market. There are 306 bonds in its holding currently. The total expense is 1.52% per year which includes 1.47% baseline expense and 0.04% interest expense. As of January 8 2011, the fund sells at 3.06% premium from its NAV.

E. PIMCO Corporate Opportunity

PIMCO Corporate Opportunity fund seeks high current income with capital appreciation through investment in corporate debt obligations and other corporate income producing securities. The fund manager is Bill Gross since 2009. The fund has 98.37% of country allocation in USA market. The Top 5 sectors of this fund are Other, Banks, Non-Captive Consumer Finance, Insurance Life, Airlines, and Non-Captive Diversified Finance. There are 422 bonds in its holding currently. The total expense is 1.29% per year which includes 1.20% baseline expense and 0.09% interest expense. As of January 19 2011, the fund sells at 7.18% premium from its NAV. The bond Average Duration in this fund is 10.80 years.

F. PIMCO High Income Fund

The PIMCO High Income Fund investment objective is to provide high current income with capital appreciation through investment in corporate debt obligations and income producing debt securities. This is one of the largest PIMCO closed end funds with asset of 1.55 Billion. The fund manager is Bill Gross since 2009. The Top 5 sectors of this fund are Non-Captive Consumer Finance, Miscellaneous, Insurance Life, Banks, and Electric Utility. It has 100.00% of asset in USA bond debt market. There are 338 bonds in its holding currently. The total expense is 1.24% per year which includes 1.14% baseline expense and 0.10% interest expense. As of January 19 2011, the fund sells at 39.61% premium from its NAV.


PIMCO Strategic Global Government Portfolio
PIMCO Strategic Global Government Portfolio | Source

G. PIMCO Strategic Global Government

PIMCO Strategic Global Government fund seeks high current income with capital appreciation through investment in global sovereign debt securities. The fund manager is Daniel J Ivascyn since 2002. The fund has 68.21% of country allocation in USA market. The top 5 sectors of this fund are Agency debt, corporate debt, mortgage backed securities debt, short term debt and senior loans debt. There are 888 bonds in its holding currently. The total expense is 1.63% per year which includes 1.04% baseline expense and 0.58% interest expense. As of January 19 2011, the fund sells at 2.02% premium from its NAV.

H. PCM Fund

PCM Fund seeks high current income with capital appreciation through investment in commercial mortgage backed and non investment grade securities. The fund manager is Daniel J Ivascyn since 1998. The fund has 96.19% of country allocation in USA market. The top 5 sectors of this fund are Multi-Class CMOs (Collateralized Mortgage Obligation), corporate mortgage debt, Real Estate ABS, Other mortgage debt and multifamily mortgage debt. There are 180 bonds in its holding currently. The total expense is 2.64% per year which includes 1.67% baseline expense and 0.96% interest expense. As of January 19 2011, the fund sells at 3.37% premium from its NAV.


Some good brokerages

You will need a brokerage to buy closed end funds (CEFs) such as:

  • Fidelity – You can trade stock and ETF for $7.95 per trade. Some Ishares ETFs are offered for free.
  • Firstrade – You can trade stock as well as ETF for $6.95 per trade. You can also trade mutual funds.
  • Vanguard – Investors and traders can trade stock and etf for $7.0 per trade up to 25 trades/ year. Vanguard ETFs are free.
  • SogoTrade - You can buy stock online and ETF for $3.00 per trade.

Disclosure: I have no affiliation with any of these funds. I also have no position in any of these CEFs. Please do your own research for additional details. Please trade and invest responsibly. Past Performance is No Guarantee of Future Results.


What did Bill Gross buy last December 2010?

(click column header to sort results)
Fund Description  
Ticker  
Value  
PIMCO Income Strategy Fund
PFL
$1,797,589
PIMCO Income Strategy Fund II
PFN
$1,681,669
PIMCO Corporate Income Fund
PCN
$3,031,139
PIMCO Corporate Opportunity Fund
PTY
$8,045,998
PIMCO High Income Fund
PHK
$2,419,148

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8 comments

LillyGrillzit profile image

LillyGrillzit 5 years ago from The River Valley, Arkansas

I always thought Bonds were very low risk, and honestly didn't know what 'junk bonds' meant. This may be a stupid question, but when citys, or counties, in the US offer Bonds, is there a risk? Sorry if off topic. Voted up.


chan0512 profile image

chan0512 5 years ago from Camarillo, CA Author

Bonds have lower risk profile. But any investment always involves risk. :)... Junk bonds are bonds that has higher risk profile due to lower credit quality of the companies or entities which issue the debt/bond. Typically this junk bond or non investment grade bond has higher yield than investment grade bond. Higher risk means higher reward.

Lilly, no that's a good question. There is a risk as explained before. Actually city or counties which usually refer to local government can be very risky depend on its credit rating. Some cities has default its bond and filed bankruptcy such as Vallejo, CA and many more. Consider buying a group of bonds such as national municipal bond or state bond. State still can’t file bankruptcy due to current law. Hope this help. Thanks again for stopping by.


LillyGrillzit profile image

LillyGrillzit 5 years ago from The River Valley, Arkansas

Wow, that answered a lot of pre-conceived mis-conceptions I held. Our State has a constitutional amendment, that it may not operate in debt. The State of Arkansas has loads of $$ surplus.


chan0512 profile image

chan0512 5 years ago from Camarillo, CA Author

I see. I still think Arkansas issue bonds for its short term general obligation, but not sure about the AR constitution. I believe you know more than me. :) Though, I can't find many AR Muni bond funds.


LillyGrillzit profile image

LillyGrillzit 5 years ago from The River Valley, Arkansas

I don't know, I have heard of city muni bonds, not sure, nothing. :0)


chan0512 profile image

chan0512 5 years ago from Camarillo, CA Author

I can only found one AR Muni bond fund such as MFS Arkansas Municipal Bond. On the first look, this fund has very steep front end sales of 4.75%. I would be very careful before invest in this. :). Thanks for your insight.


LillyGrillzit profile image

LillyGrillzit 5 years ago from The River Valley, Arkansas

Thank you!!!! You are the best. I cannot wait to have you for a financial advisor. Just waiting on the $$ to be earned. :0)


chan0512 profile image

chan0512 5 years ago from Camarillo, CA Author

You're welcome. Anytime I can help fellow friend or hubber, I'll be very happy to help.

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