A Unique Approach With Pacific FundsSM
Pacific Asset Management, November 2019
Join Pacific Funds Fixed Income portfolio manager David Weismiller and senior managing director Dominic Nolan as they discuss the investment approach for Pacific Funds Core Income.
Describe the investment approach to managing Pacific FundsSM Core Income.
Dominic Nolan: Pacific Funds Core Income is an intermediate‐term bond fund with an emphasis on investment-grade corporate debt. The fund also has the flexibility to invest across the credit and broad investment grade spectrum.
David Weismiller: We believe this approach provides a higher level of income while maintaining the attributes of preservation of capital and diversification that investors have come to expect from their fixed-income allocation.
What makes your approach different from other managers?
Dominic Nolan: Most intermediate‐term bond funds focus on the non‐corporate areas of the investment-grade universe, such as Treasuries, Agencies, and Mortgages (see chart at 00:55). These areas represent over two-thirds of the Bloomberg Barclays U.S. Aggregate Bond Index, a broad fixed income benchmark. Pacific Funds Core Income is focused on a sector that represents approximately one quarter of the universe.
David Weismiller: While the yield investors receive from corporate debt can be attractive, it is important to understand the credit risk. We can actively mitigate this risk in different ways.
First, and probably most important, is being selective in what securities we choose. Since default risk tends to be the primary risk of corporate securities, understanding an issuer, or company, is critical. Our investment process is anchored in fundamental research, managed by an experienced team of professionals, and focused on analyzing individual credits. Over time, avoiding the defaults in corporate debt can help protect investor capital and favorably increase the risk/reward balance.
Second, we have the flexibility to invest in additional non‐corporate areas of fixed income, such as agencies or treasuries, which can not only diversify the risk of the portfolio but help decrease volatility in the event corporate debt experiences headwinds.
Dominic Nolan: In summary, Pacific Funds Core Income is aiming to deliver value through a focus on corporate debt securities with the flexibility to benefit from opportunities across the credit quality and investment-grade bond spectrum, while selectively investing in issues with which we have a high degree of conviction.
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About Principal Risks: All investing involves risks including the possible loss of the principal amount invested. There is no guarantee the Fund will achieve its investment goal. Corporate bonds are subject to issuer risk in that their value may decline for reasons directly related to the issuer of the security. Not all U.S. government securities are checked or guaranteed by the U.S. government, and different government securities are subject to varying degrees of credit risk. Mortgage-related and other asset-backed securities are subject to certain rules affecting the housing market or the market for the assets underlying such securities. The Fund is subject to liquidity risk (the risk that an investment may be difficult to purchase, value, and sell particularly during adverse market conditions, because there is a limited market for the investment, or there are restrictions on resale) and credit risk (the risk an issuer may be unable or unwilling to meet its financial obligations, risking default). High-yield/high-risk bonds (“junk bonds”) and floating-rate loans (usually rated below investment grade) have greater risk of default than higher-rated securities/higher-quality bonds that may have a lower yield. The Fund is also subject to foreign-markets risk.
This commentary represents the views of the portfolio managers at Pacific Asset Management as of 9/30/2019, and are presented for informational purposes only. These views should not be construed as investment advice, an endorsement of any security, mutual fund, sector or index, or to predict performance of any investment. Any forward-looking statements are not guaranteed. All material is compiled from sources believed to be reliable, but accuracy cannot be guaranteed. The opinions expressed herein are subject to change without notice as market and other conditions warrant. Sector names in this commentary are provided by the Fund’s portfolio managers and could be different if provided by a third party.
Pacific Life Fund Advisors LLC (PLFA), a wholly owned subsidiary of Pacific Life Insurance Company, is the investment adviser to the Pacific Select Fund (PSF) and the manager of certain PSF portfolios. PLFA also does business under the name Pacific Asset Management and manages certain PSF portfolios under that name.
Pacific Life Insurance Company is the administrator for Pacific Funds. It is not a fiduciary and therefore does not give advice or make recommendations regarding insurance or investment products.
You should consider a fund's investment goal, risks, charges, and expenses carefully before investing. The prospectus and/or the applicable summary prospectus contain this and other information about the fund and are available from your financial advisor. The prospectus and/or summary prospectus should be read carefully before investing.
No bank guarantee • May lose value • Not FDIC insured