Pimco Reduces Junk Bonds and Other Corporate Debt, Ivascyn Reports

By Jennifer Ablan

NEW YORK – Pimco has been decreasing its investment in junk bonds and investment-grade corporate debt following the latest credit rally, according to Dan Ivascyn, the firm’s group chief investment officer.

Ivascyn noted in a telephone interview, “We entered high-yield and investment-grade before the Brexit referendum due to valuations. We’ve experienced a significant rally in risk assets, driven by increased central bank support following Brexit, so we are liquidating some positions.”

The June 23 vote in the United Kingdom to exit the European Union, referred to as Brexit, has added to the uncertainty surrounding the global economic landscape.

Overseeing $1.51 trillion at Pacific Investment Management Company, Ivascyn expressed optimism about housing-related corporate credits and non-agency mortgage-backed securities, stating, "they still have room to appreciate in value."

Recently, Pimco attracted attention by hiring Emmanuel "Manny" Roman from Man Group, the largest publicly traded hedge fund, as its new chief executive officer.

The company has faced several years of outflows from its major funds, including the flagship Pimco Total Return Fund, amid tepid performance and executive turnover. Bill Gross, a co-founder dubbed "the Bond King," departed in 2014 for competitor Janus Capital Group Inc.

Ivascyn clarified that Roman’s appointment, while promising, does not indicate that Pimco will embark on a spree of mergers and acquisitions. "Pimco is not going on an M&A binge," he asserted. "While Manny brings valuable insights into alternative businesses, he also values Pimco’s traditional fixed-income operations."

He mentioned that he has been in touch with various clients and consultants regarding Roman’s recruitment, emphasizing that such discussions are typical after a leadership transition.

Ivascyn emphasized the necessity for investors to acknowledge the evolving landscape of the asset management industry and to anticipate some consolidation. "Numerous forces are reshaping financial markets and asset management, and we must remain prepared," he stated.

When asked about the upcoming U.S. presidential elections, Ivascyn indicated that Pimco’s internal assessments of demographics and the electoral map suggest favorable odds for a Hillary Clinton victory, despite the fluctuating nature of polls, especially during party conventions.

“The odds favor a Clinton win based on our internal analysis of the electoral landscape,” he concluded.