Advertisement
investing

A Pimco Stock Fund Makes Good

The firm uses bonds and currency hedges to produce the year’s top overseas fund.

If you were searching for a good foreign stock fund, you might not have given much thought to bond powerhouse Pimco. But over the past year, no other fund focusing on big overseas companies did better than Pimco In­ternational StocksPLUS AR Strategy (U.S. Dollar-Hedged, symbol PIPDX), which walloped its peers by an average of 17.2 percentage points.

If the lengthy name suggests that the fund uses a complex strategy, that’s because it does. Like all of Pimco’s StocksPLUS portfolios, the fund has a two-pronged approach. Part of the fund tracks a benchmark—in this case, a version of the MSCI EAFE foreign-stock index that hedges against currency fluctuations—by devoting a small portion of its assets to derivatives (instruments whose results depend on the moves of other investments).

Advertisement - Article continues below

Managers Mohsen Fahmi and Sudi Mariappa invest what’s left over (the bulk of the fund’s assets) in bonds. They mostly adhere to the big-picture strategy set by Pimco’s investment committee, but they can make tactical moves within those guidelines. The goal: to use the gains from the bonds to beat the index that the fund tracks.

But the fund’s recent success is due almost entirely to the currency hedge. Most unhedged funds weren’t so lucky; they saw their returns diminish as the greenback strengthened. The ultimate proof: The unhedged version of the very same Pimco fund (symbol PPUDX) lost 1.8% over the past year.

Pat Harrington Jr.
K5I-FUNDTRENDS_RANKINGS.a.indd

Thinkstock

Advertisement

Most Popular

What Are the Income Tax Brackets for 2020 vs. 2019?
tax brackets

What Are the Income Tax Brackets for 2020 vs. 2019?

The IRS unveiled the 2020 tax brackets, and it's never too early to start planning to minimize your future tax bill.
June 20, 2020
65 Best Dividend Stocks You Can Count On
stocks

65 Best Dividend Stocks You Can Count On

These 65 Dividend Aristocrats are an elite group of dividend stocks that have reliably increased their annual payouts every year for at least a quarte…
July 8, 2020
Find a Great Place to Retire
happy retirement

Find a Great Place to Retire

Our cities provide plenty of space to spread out without skimping on health care or other amenities.
July 2, 2020

Recommended

Saver's Credit: A Retirement Tax Break for the Middle Class
Tax Breaks

Saver's Credit: A Retirement Tax Break for the Middle Class

Your retirement contributions could be the key to a lower tax bill.
July 9, 2020
Avoid Blindly Following Random Benchmarks on the Road to Retirement
retirement planning

Avoid Blindly Following Random Benchmarks on the Road to Retirement

Unless the benchmark is relevant to your personal plan, it could steer you into taking a wrong turn.
July 8, 2020
13 Best Vanguard Funds for the Next Bull Market
mutual funds

13 Best Vanguard Funds for the Next Bull Market

Optimistic that the bounce since March is indeed the start of the next bull market? Here are the 13 best Vanguard funds to help you make the most of i…
July 7, 2020
15 Best Fidelity Funds for the Next Bull Market
mutual funds

15 Best Fidelity Funds for the Next Bull Market

Investors looking to squeeze more profit from the next bull run can look to Fidelity funds for strong active management and tactical investments.
July 7, 2020