(April 8, 2013) — PIMCO has launched an inflation strategy fund for European investors looking to hedge global inflation risks while chasing enhanced real returns.
The PIMCO GIS Inflation Strategy Fund invests in a range of real assets – such as global inflation linked bonds, commodities, emerging market currencies and so on – and then actively manages the assets and underlying investments while incorporating tail risk hedging strategies.
This multi-asset approach is designed to protect against downside risk, while positioning inflation-related assets to benefit from inflation dynamics, the company said.
Mihir Worah, managing director and head of the real return portfolio management team, said the array of policies implemented by developed country governments and central banks had resulted in unsustainably high debt levels and zero-bound nominal interest rates, resulting in an increased risk in higher inflation in future.
“Investors’ portfolios, which traditionally include stocks and bonds, may be inadequately positioned to withstand rising inflation,” Worah said. “The PIMCO GIS Inflation Strategy Fund takes a comprehensive approach to arm investors with key inflation-sensitive assets and Pimco’s real return expertise helps us determine how much of each asset to buy in any given environment.”
In response to the launch, Gurjit Dehl, creative economist at Redington, told aiCIO: “Over the long-term, inflation can eat away a significant proportion of investors’ returns if left unhedged.
“As witnessed in Japan last week, central banks remain alert to any weakness in growth and are willing to add monetary stimulus in new and increasingly unconventional ways.
“The outlook for growth, markets, inflation and policy responses remain uncertain. It is impossible to predict where inflation will go and investors should be more focused on hedging the risks than with calling the markets.”
Inflation was cited as one of the top fears by investors responded to a survey by investment consulting firm bFinance at the end of last year.