how does PCFIX (pimco's small cap value) compare to VTWV?

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Post Reply
Topic Author
asheman
Posts: 3
Joined: Tue Jan 12, 2021 7:15 pm

how does PCFIX (pimco's small cap value) compare to VTWV?

Post by asheman »

I've been investing with Vanguard for many years, but this is my first post on this site.

I was wondering if someone might be able to provide some insight into how the theoretical performance of PCFIX (pimco's small cap value Russell fund) https://www.pimco.com/en-us/investments ... -fund/inst - might compare to VTWV (Vanguard's small cap value Russell ETF) https://investor.vanguard.com/etf/profile/VTWV

PCFIX has outperformed VTWV, on average, over the course of PCFIX's inception in 2011 (a very small sample size).

-- Will PCFIX's performance relative to VTWV be solely due to the performance of PCFIX's managers?

-- Is there an impact of the bond component of this fund that will theoretically cause PCFIX to rise by a relatively larger percentage, all else equal, when VTWV is rising (and vice versa)? Does this work as leverage, similar to PSLDX?

-- Will PCFIX underperform VTWV, all else equal, when interest rates are rising (and vice versa)?

-- Is it not possible to model PCFIX prior to its 2011 inception because it's a managed fund?

I am wondering if PCFIX (which has a $25k minimum and a much larger expense ratio) may be a good replacement for the VIOV component of my IRA.

Thanks in advance for any help.
Mark
Pandemic Bangs
Posts: 375
Joined: Sat Dec 26, 2020 3:49 pm

Re: how does PCFIX (pimco's small cap value) compare to VTWV?

Post by Pandemic Bangs »

Welcome! Apples and oranges, I think.

The PIMCO is mostly mid-cap growth plus some bond component with ER 0.8 and ~ $0.8B in assets, with leverage and active management.

The Vanguard is small-cap value index (98% small-cap) with ER 0.15 and ~ $0.6B in assets.

The former has only existed for nine years, during which it has had a higher CAGR of 12.9 vs 10.1 for Vanguard; however, the PIMCO tanked to nearly the same level in March of 2020.

So you are comparing a growth-oriented mid/small-cap/bond active management with leverage to a very value-oriented small cap index? I can't guess the winner going forward.

Most here are not fans of active management or leverage but some are, as I'm sure you know. Answers to your questions would just be guesses, imo. I'm not able to model the PIMCO pre-inception because who knows what it is or was.
Wait 'til I get my money right | Then you can't tell me nothing, right?
Topic Author
asheman
Posts: 3
Joined: Tue Jan 12, 2021 7:15 pm

Re: how does PCFIX (pimco's small cap value) compare to VTWV?

Post by asheman »

Thank you for taking the time to reply. From looking at PIMCO's description they refer to the fund as, "a diversified portfolio of U.S. stocks using the Research Affiliates Equity (RAE) strategy, an innovative value approach designed to outperform the Russell 2000® Value Index."
Pandemic Bangs
Posts: 375
Joined: Sat Dec 26, 2020 3:49 pm

Re: how does PCFIX (pimco's small cap value) compare to VTWV?

Post by Pandemic Bangs »

asheman wrote: Wed Jan 13, 2021 6:39 pm Thank you for taking the time to reply. From looking at PIMCO's description they refer to the fund as, "a diversified portfolio of U.S. stocks using the Research Affiliates Equity (RAE) strategy, an innovative value approach designed to outperform the Russell 2000® Value Index."
The much bigger black box than the actual equity holdings is the leverage piece, which I am pretty useless on. For fun, look at their top equity holdings on Morningstar (under the "Portfolio" tab).
Wait 'til I get my money right | Then you can't tell me nothing, right?
BJJ_GUY
Posts: 481
Joined: Wed Mar 13, 2019 7:45 am

Re: how does PCFIX (pimco's small cap value) compare to VTWV?

Post by BJJ_GUY »

asheman wrote: Wed Jan 13, 2021 6:39 pm Thank you for taking the time to reply. From looking at PIMCO's description they refer to the fund as, "a diversified portfolio of U.S. stocks using the Research Affiliates Equity (RAE) strategy, an innovative value approach designed to outperform the Russell 2000® Value Index."
Research Affiliates just creates a factor-driven "index" that is similar to the Russell 2000. Call this the RAFI 2000 Index

The fund takes ~5% of capital and uses futures and total return swaps which references the RAFI index. This gives the investor the same economic exposure as being invested 100% in an equity fund. However, because there is still 95% of the cash remaining in the portfolio, PIMCO uses that cash to actively manage a bond portfolio in an effort to produce returns in excess of the passive equity exposure

Total Return = RAFI 2000 Index + Active bond performance

This is a naive imitation of a hedge fund strategy that is otherwise known as 'portable alpha'. If you have further interest how this works, you can probably find plenty of articles explaining more about portable alpha
Post Reply