One of the proposition’s differentiators is that the fund’s underlying index defines its country allocation depending on national income (GDP) and a country’s capacity to service its debt. As a result its allocation tends towards the key global economies of China and India.
Chris Getter, an emerging markets product manager at Pimco, explains this rationale, saying: “Unlike traditional debt market capitalisation indices, which reflect past patterns of issuance, Pimco’s GDP weighting is forward looking. It emphasises growing economies with strong fundamentals where there may be new opportunities.”
Part of the reason for launch, he added, is the difference between the emerging and developed markets where the former have stronger growth prospects and fewer debt concerns than the latter, while at the same time offering higher yields. He also looks to the positive that local currency bond markets are now larger and more liquid than external debt markets and, depending on their relative positions, offer potential for currency appreciation.
The product uses physical investment and is fully transparent with the fund holdings available online. It is registered for sale in the UK and other European and Scandinavian countries.
