Sydney, Australia (September 28, 2015) – PIMCO, a leading global investment management firm, has launched the PIMCO Capital Securities Fund into the Australian marketplace. The fund aims to help Australian investors to diversify their exposure to Australian financials by offering a global opportunity set of PIMCO’s top global financial ideas without the constraints of an index. The fund is designed for an investor’s higher-risk fixed income allocation, and it may act as an attractive alternative to Australian bank hybrids, traditional high yield bonds or equities, while enhancing overall portfolio diversification. The fund may improve the risk-adjusted return characteristics of an investment portfolio with high exposure to Australia’s major banks, especially at a time when Australia’s banking sector has increasing exposure to the domestic property market.1
The Australian launch follows the successful launch of similar strategies offshore that have raised over US$5.6 billion (as at 31 August 2015) since it was designed in London 2011 to capitalise on the de-leveraging and re-regulation trend across the financial sector. PIMCO believes there are compelling opportunities in bank securities that sit lower in the capital structure due to the multi-year deleveraging in the global banking sectors and the stricter capital requirements imposed by regulators on large global financial institutions.
Philippe Bodereau, Managing Director and Portfolio Manager of the PIMCO Capital Securities Fund based in London said, “Many Western banks are now operating at record high levels of capital and these improving fundamentals are positive for capital securities.” Mr. Bodereau adds, “The securities also offer relatively higher premiums, due in part to regulatory-influenced supply, and tend to have a low or negative correlation with interest rates. If rates should rise, capital securities are likely to perform better than other parts of the fixed-income markets.”
The fund benefits from PIMCO’s time-tested investment process and substantial global credit capabilities, which includes more than 60 seasoned credit analysts located across PIMCO’s network of global offices, with nine focused exclusively on financials. The fund offers investors a long-term, strategic allocation to the global financial sector through investments primarily in subordinated and contingent convertible bonds (CoCos), including Additional Tier 1 (AT1) bonds, which are part of new capital requirements by Basel III. It offers embedded flexibility to allocate across the capital structure, ranging from senior bonds and Tier 1 bonds to CoCos and even equities, based on PIMCO’s assessment of risks and relative value.
Adrian Stewart, Head of PIMCO Australia, comments, “The global banking industry is undergoing a generational paradigm shift and the latest developments on Australian banks’ capital adequacy requirements from APRA is a clear sign that this shift has reached Australia. As a consequence, the underlying exposure for investors in Australia’s major banks is becoming increasingly homogenous and concentrated in domestic residential property.”
“Given Australian investors’ significant exposure to the major banks, we believe PIMCO Capital Securities Fund offers a compelling opportunity for Australian investors to diversify their concentrated domestic bank exposure, mainly in Australian bank equities and hybrid securities, by harnessing a diversified global opportunity set.” Mr. Stewart added, “The launch of the fund underscores PIMCO’s commitment to the Australian market and our ability to respond effectively to local market demands.”