SOURCE: PIMCO

PIMCO

July 13, 2010 08:00 ET

New PIMCO Global Advantage Government Bond Indexes Help Investors Navigate Shifting Global Debt Dynamics

Global and European Government Bond Indexes Avoid Shortfalls of Traditional Indexes

NEWPORT BEACH, CA--(Marketwire - July 13, 2010) - PIMCO, a leading investment management firm, has unveiled the PIMCO Global Advantage Government Bond Index (GLADI Government) and European Advantage Government Bond Index, two sovereign bond benchmarks designed to capture fixed income investment opportunities in a rapidly changing world. Markit LLC, an unaffiliated leading financial information services company and global index provider, will administer and calculate these newest members of the family of Global Advantage indexes first launched in January 2009.

The key differentiating feature of the new indexes is a gross domestic product (GDP)-weighting methodology that contrasts with the debt-weighted, market capitalization methodology of traditional indexes. GLADI Government covers the full set of investment-grade global government bond markets. European Advantage covers investment-grade government bonds issued by European countries, where problems in Greece and other peripheral economies underscore the need to reassess existing benchmarks.

"The explosion of public debt levels in industrialized countries is reshaping global bond markets," said Ramin Toloui, executive vice president and portfolio manager. "Improved approaches to indexing can help investors avoid the bias of traditional indexes toward high-debt issuers and embed more favorable performance characteristics in their fixed income benchmark."

Instead of giving the highest weights to the countries with the most debt, which is a characteristic of market capitalization-weighted indexes, GLADI Government and European Advantage Government indexes give the highest weights to countries with the highest income based on gross domestic product (GDP). The advantages of such an approach include:

  • Higher Allocation to Low-Debt Countries: GDP weighting favors countries with higher income and therefore better capacity to service their debt, in contrast with market capitalization-weighted indexes that can overweight highly indebted countries with the largest stocks of outstanding liabilities.
  • Forward-Looking: GDP weighting helps structurally position portfolios in countries with stronger growth dynamics, including emerging markets, which are likely to attract increasing global capital flows in the coming years and have traditionally been underrepresented in market capitalization-weighted indexes.
  • Counter-Cyclical Rebalancing: GDP weighting avoids the problem of market capitalization weighting that increases the weight of securities as they go up in price. In fact, it has the potential to benefit from counter-cyclical rebalancing, as bond prices tend to move inversely to GDP growth over the business cycle.

More information on the index, including detailed information on construction methodology, can be found at http://www.pimcoindex.com/, including a link to Markit's website.

Certain features of the PIMCO Global Advantage Government Bond Index are patent pending. GLOBAL ADVANTAGE and GLADI are trademarks of Pacific Investment Management Company LLC. It is not possible to directly invest into an unmanaged index.

About PIMCO
PIMCO is a global investment management firm that was founded in southern California in 1971. The firm serves an array of clients and manages retirement and other assets that reach more than eight million people in the U.S. and millions more around the world. Our clients include state, municipal, union and private sector pension and retirement plans, educational institutions, foundations, endowments, philanthropic and healthcare institutions, individual and investment savings accounts and public sector reserve management and other public entities in North and South America, Europe, the Middle East and Asia. PIMCO has more than 1,200 employees. In addition to its headquarters in Newport Beach, California, the firm has offices in Amsterdam, Hong Kong, London, Munich, New York City, Singapore, Sydney, Tokyo, Toronto and Zurich. PIMCO is owned by Allianz S.E., a global insurance conglomerate.

About Markit
Markit is a financial information services company with more than 1,000 employees in Europe, North America and Asia-Pacific. Over 1,000 financial institutions use Markit's independent services to manage risk, improve operational efficiency and meet regulatory requirements. Markit is a leading independent global index provider and owns, manages, administers and calculates the Markit iBoxx, Markit iTraxx and Markit CDX indices. For more information, see www.markit.com.

Except for the historical information and discussions contained herein, statements contained in this news release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may involve a number of risks, uncertainties and other factors that could cause actual results to differ materially, including the performance of financial markets, the investment performance of PIMCO's sponsored investment products and separately managed accounts, general economic conditions, future acquisitions, competitive conditions and government regulations, including changes in tax laws. Readers should carefully consider such factors. Further, such forward-looking statements speak only on the date at which such statements are made. PIMCO undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.

Contact Information

  • Contact:
    Steven Vames
    PIMCO - Media Relations
    212-739-3598