Ivascyn: We held the first economic forum back in the late 1970s. Today they still serve the same purpose, they are a way for us to step back and to think about the trends that could impact economies and markets for months and years to come. They ultimately help us read the road ahead.
Text on screen: Tiffany Wilding, Economist
Wilding: We're always thinking about the next forum. What are the topics? What should we focus on? What are the market themes?
Text on screen: Daniel J. Ivascyn, Group Chief Investment Officer
Ivascyn: Goal of the forums is to gain a better understanding of key economic themes that are going to impact financial markets.
Text on screen: Lupin Rahman, Head of EM Sovereign Credit
Rahman: Means that we're able to take those conditions and apply them to the assumptions that we're making for each country's bottom up macro outlook. That very structured global view is incredibly important in determining how we position ourselves.
Text on screen: Steve A. Rodosky, Portfolio Manager, Real Return and Long Duration
Rodosky: And so we do three cyclical forums and one secular forum each year.
Wilding: The cyclical outlook is something like 12 months to 18 months, whereas, a secular outlook is something like five years.
Text on screen: Richard Clarida, Global Economic Advisor
Clarida: And that goes all the way back 40 plus years ago. And obviously we take it quite seriously.
Rodosky: The whole thing is a story with a beginning, a middle, and an end. And the ending is what that portfolio looks like.
Rahman: PIMCO's focus on listening to diverse opinions and really thinking outside the box is really, really unique.
Wilding: About a month before we ask all of the regional committees and economist actually come up with their forecasts for GDP, for inflation, for the unemployment rate, for their particular regions, for monetary policy, for fiscal policy. Assign people to lead each session within the forum after kind of devising that agenda.
Text on screen: Stephen Chang, Portfolio Manager, Asia
Chang: We have to really tune up on our intellectual fitness to be ready for the debate and the internal sparring of ideas.
Rodosky: Second guess everything going into a debate and don't start off with a full set of assumptions.
Ivascyn: It's an attempt to combat group think, elevating contrarian views, challenging our current thinking. And it allows us to solicit feedback from a wider range of individuals. People that are outside the day-to-day investment decision making process that could have a unique perspective.
Text on screen: Christian Stracke, Global Head of Credit Research
Stracke: Back in 2016, before the election, we were having a pretty intense debate with Ben Bernanke. It was an extraordinary debate, and it was a great example of how at PIMCO, there's nothing sacred. The level of debate, the level of discourse, the intensity of the debate.
Rodosky: It's a very non-hierarchical process, so it's common to have a vice-president disagreeing with a managing director, and that keeps things exciting. One of the key characteristics of our forum process is inviting every year's MBA class. It's an opportunity for them to show the rigor and substance of what they've spent their time learning on over that first year
Ivascyn: It does force us to look at alternate scenarios in a thoughtful and structured manner.
Rodosky: Try and point out something that was either looked over or not enough time was spent on it that it might come back to haunt us. Find the Lego in the carpet before you step on it.
Ivascyn: There have been certainly instances where we've discussed key trends that have driven returns. Probably the best example, related to the housing market, in the years leading up to the global financial crisis, with a focus on aggressive underwriting and a lot of froth in the US, that’s an example where we began to uncover these key themes and trends back in 2004. Because we played great defense on behalf of clients, we are able to go offense on their behalf in the many years to come.
Wilding: It allows us to think about where markets are going, where the economies are going, but it also allows us to think about risks. And in terms of portfolio management, it's all about managing the risks. Those are the kinds of things that help clients, active management instead of passive. And we think year after year, that's providing our clients value.
Stracke: Frankly, I'm not really sure how you can operate without this kind of a common baseline. Some of our competitors, are not integrated the way that we are. And what you might end up with is kind of a hodgepodge of different economic views, maybe explicit, but often implicitly baked into a lot of positions.
Ivascyn: And then after the forums, the portfolio management group in particular gets together for several days.
Stracke: The high level discussion of economics is critically important, but what's most important is then translating those views into, what are we going to do with our client's assets? How are we going to position our client's portfolios?
Rodosky: The content that we deliver stretches far beyond just the fixed income corner.
Rahman: What has always struck me is that, regardless of which country I'm in, they will always ask me about PIMCO's views on the treasury market, our global macro views, how is PIMCO thinking about current market conditions and the state of the financial markets. Not only our clients, but essentially a large part of our counterparties really value what PIMCO thinks.
Stracke: We have a bit of an edge in economic thinking.
Rodosky: Customers should find confidence in the fact that we're constantly trying to make ourselves a better firm.
Ivascyn: It's, again, a key part of what we are as a firm. And for that reason, we're going to continue to not only conduct forums, but embrace that key element of our overall process in the firm culture.
Clarida: It’s a good process. It’s served us well.
Disclosure
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