Pimco branches out with dividend funds

Pacific Investment Management Co., the money manager best known for its bond funds, opened two new dividend-focused equity funds run by a pair of former Thornburg Investment Management Inc. executives.
The Pimco EqS Dividend Fund and the Pimco Dividend and Income Builder Fund will invest globally in any size company without regard to sector, the Newport Beach, California-based firm said today in a statement. Brad Kinkelaar, who left Thornburg at the end of 2008, and Cliff Remily, who left last year, will manage the funds.
Pimco, under Chief Executive Officer Mohamed El-Erian, started a push into equities more than two years ago as it sought to reduce its dependence on traditional fixed-income strategies. The firm hired former U.S. Treasury official Neel Kashkari in December 2009 to lead that expansion. Pimco has since built three distinct investment teams focusing on “deep value” global stocks, emerging-market equities and dividend- paying stocks.
The EqS Dividend Fund will invest in dividend-paying stocks all over the world, while the Dividend and Income Builder Fund can invest a portion of its assets in bonds, according to the statement. The fixed-income part of the fund will be managed by Eve Tournier. Matt Burdett, who also joined Pimco last year from Santa Fe, New Mexico-based Thornburg, is an analyst on the fund.
New Normal
The funds will combine Pimco’s global macroeconomic views with stock-picking by its portfolio managers, the firm said in today’s statement. Pimco has said it will pursue equity strategies with a global focus, in line with its “new normal” philosophy adopted in May 2009 to describe an era of lower returns, heightened government regulation, diminishing U.S. clout in the world economy and a bigger role for developing nations.
“This is a great strategy in any environment, and it’s even more true in the new normal, given the low interest-rate environment,” Kashkari said in a telephone interview.
Pimco, which manages about $1.35 trillion in assets, has gathered about $5 billion in its stock funds since hiring Kashkari as head of new investment initiatives. As part of its diversification, Pimco also opened exchange-traded funds, distressed debt funds and so-called tail-hedging funds, or products designed to weather falling markets.
Diversified Offerings
The $244 billion Pimco Total Return Fund, run by Bill Gross and the world’s largest mutual fund, remains the firm’s flagship. It rose 4.2 percent last year, lagging behind behind 69 percent of peers, according to data compiled by Bloomberg, prompting the fund’s first yearly redemptions.
The firm’s moves to diversify helped offset those withdrawals as Pimco attracted $60 billion in net deposits, driven by its tail-hedging funds, asset-allocation products and equity funds.
Pimco’s biggest new stock fund is the $2.1 billion Pimco EqS Pathfinder Fund, run by Anne Gudefin and Charles Lahr, former portfolio managers at Franklin Resources Inc. (BEN) The fund, which opened in April 2010, buys stocks its managers deem cheap based on earnings and other measures. It has declined 3.1 percent in the past year, beating 82 percent of similarly managed funds, according to Bloomberg data.
Global Focus
Pimco, which has more than 90 percent of its assets in bonds, in March started its first funds under Maria Gordon, the former Goldman Sachs Group Inc. (GS) portfolio manager hired to begin an emerging-markets stock group.
Kinkelaar and Remily said they prefer dividend-paying stocks outside the U.S. in regions such as Asia and Latin America. Much like Pimco, which is avoiding investments in Europe, the managers said in an interview they are “cautious” about the region because of the sovereign-debt crisis.
“There is a more robust dividend-paying culture outside the U.S. and we can find higher yields in almost every sector and geography than in the U.S.,” Kinkelaar said.
–Bloomberg News–