PONDX asset allocation a negative % for cash?
PONDX asset allocation a negative % for cash?
Would someone explain to this simpleton why PONDX (Pimco Income Fund Class D) shows the following under Google Finance summary?
ASSET ALLOCATION
Cash -52.64% <-----
Stocks 0.01%
Bonds 151.46%
Preferred 0.15%
Convertible 0.02%
Other 0.0%
Does this (the -52.64% listed as Cash) mean they borrowed money to buy some bonds?
(Sorry if this it too obvious to you seasoned members)
ASSET ALLOCATION
Cash -52.64% <-----
Stocks 0.01%
Bonds 151.46%
Preferred 0.15%
Convertible 0.02%
Other 0.0%
Does this (the -52.64% listed as Cash) mean they borrowed money to buy some bonds?
(Sorry if this it too obvious to you seasoned members)
Re: PONDX asset allocation a negative % for cash?
A negative cash allocation normally indicates borrowing.
However, PIMCO does a lot of things with its fixed-income funds, such as holding futures and shorting bonds, which may cause the allocation to be a poor description of how the fund will actually behave. (For example, a fund which is long a long-term bond and short a short-term bond has no net bond allocation from the pair, but has a positive yield from the difference in rates, and a positive interest-rate risk.)
For PIMCO Income, the chart and current yield indicate that the fund is somewhat riskier than the typical multisector bund fund, and certainly much riksier than the M* computed duration of 2.84 years indicates.
However, PIMCO does a lot of things with its fixed-income funds, such as holding futures and shorting bonds, which may cause the allocation to be a poor description of how the fund will actually behave. (For example, a fund which is long a long-term bond and short a short-term bond has no net bond allocation from the pair, but has a positive yield from the difference in rates, and a positive interest-rate risk.)
For PIMCO Income, the chart and current yield indicate that the fund is somewhat riskier than the typical multisector bund fund, and certainly much riksier than the M* computed duration of 2.84 years indicates.
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Re: PONDX asset allocation a negative % for cash?
PONDX does something right. They have a great Sharpe ratio.
Re: PONDX asset allocation a negative % for cash?
I find PONDX total return chart looks a lot like VWINX but smoother line for PONDX.
I do not know if hedging could account for the negative cash.
I do not know if hedging could account for the negative cash.
Re: PONDX asset allocation a negative % for cash?
According to the prospectus they use reverse repos.
In short they borrow short term money at low rates and invest those funds in longer maturity higher yield bonds. It is the carry trade. It is a nice way to earn money as long as the yield curve stays steady and upwards sloping. If short term rates spike....
In short they borrow short term money at low rates and invest those funds in longer maturity higher yield bonds. It is the carry trade. It is a nice way to earn money as long as the yield curve stays steady and upwards sloping. If short term rates spike....
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
Re: PONDX asset allocation a negative % for cash?
What would happen to PONDX if short term rates rose?
Get most of it right and don't make any big mistakes. All else being equal, simpler is better. Simple is as simple does.
Re: PONDX asset allocation a negative % for cash?
I would guess not much but really who knows? It has a duration of 1.7 which suggests a low exposure to raising rates. However that duration is arrived after the fund has done some pretty amazing things. It heavily uses reverse repos, swaps, and mortgage debt which can act oddly. This is an actively managed fund which has a very broad mandate, going places which few other funds go. So wheels withing wheels. If you invest in this fund you have to trust that the high fees pay for good active management. This is not a unreasonable assumption considering their track record. The other choice is to spend a good week reverse engineering how the fund works. I am not sure I can point to a comparable fund in terms of complexity.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
Re: PONDX asset allocation a negative % for cash?
Thanks. The performance of this fund leads me to conjecture that Ivascyn has stumbled on a stash of Magic Pixie Dust, and I guess we'll have to wait and see what happens when his stash runs out.alex_686 wrote: ↑Tue Aug 22, 2017 4:28 pmI would guess not much but really who knows? It has a duration of 1.7 which suggests a low exposure to raising rates. However that duration is arrived after the fund has done some pretty amazing things. It heavily uses reverse repos, swaps, and mortgage debt which can act oddly. This is an actively managed fund which has a very broad mandate, going places which few other funds go. So wheels withing wheels. If you invest in this fund you have to trust that the high fees pay for good active management. This is not a unreasonable assumption considering their track record. The other choice is to spend a good week reverse engineering how the fund works. I am not sure I can point to a comparable fund in terms of complexity.
Get most of it right and don't make any big mistakes. All else being equal, simpler is better. Simple is as simple does.
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Re: PONDX asset allocation a negative % for cash?
It is probably transactions in Derivatives (futures, forwards, options or swaps).CenTexan wrote: ↑Mon Jul 17, 2017 4:39 pm Would someone explain to this simpleton why PONDX (Pimco Income Fund Class D) shows the following under Google Finance summary?
ASSET ALLOCATION
Cash -52.64% <-----
Stocks 0.01%
Bonds 151.46%
Preferred 0.15%
Convertible 0.02%
Other 0.0%
Does this (the -52.64% listed as Cash) mean they borrowed money to buy some bonds?
(Sorry if this it too obvious to you seasoned members)
Usually when you buy a bond future or forward, you have to hold cash against the liability-- what you will pay on the delivery date. Forwards and futures can be low cost ways of implementing a strategy, and the leverage risk (because you do not have to put up 100% of contract value when you buy the contract) can be controlled by holding cash equivalent to the final value. This makes it equivalent in risk-return terms to a cash purchase of a bond, but at lower transaction costs.