PIMCO targets Asia retail market
PIMCO, the Newport Beach, California-based bond fund house, is targeting retail investors in Asia (ex-Japan) for the first time, says Brian Baker, CEO and director at PIMCO Asia in Singapore. PIMCO already manages $8 billion of Asian institutional client money and wants to expand to retail. “We’re testing the waters,” he says, by teaming up with distributor HSBC to offer a clone of the firm’s US flagship product, the Total Return fund.
This US product, managed by PIMCO CIO Bill Gross in Newport Beach, has existed for 30 years and now has $40 billion under management from US retail and institutional clients. Its popularity prompted PIMCO to establish an exact replica of it in Dublin for international clients in 1998. PIMCO also offers out of Dublin a high-yield fund, a global bond fund and an enhanced equity index fund, which uses the cash from futures on the S&P 500 to invest in short-term bonds. These other products, however, will not be marketed to retail investors for now.
The total return fund is very broad, says Baker. Most of it is invested in US fixed income, but up to 20% can also go to non-US and emerging market debt. It invests in government, corporate, agency and mortgage debt.
This is the first time HSBC has distributed PIMCO products. Baker notes the firm will be looking to find other distributors for the total return fund in Asia as well, and he also hopes to expand the relationship with HSBC. “HSBC was looking to expand their product offering and develop their financial advisory services to their clients,” Baker says. PIMCO is open to not just broadening its distribution, but also creating new funds if a distribution partner believes there is sufficient demand. PIMCO already uses several leading brokers in Japan to reach Japanese retail clients.
If the total return fund is a hit in Hong Kong, Baker says it is a simple matter to register it with other jurisdictions, with Singapore the obvious next step. “We want to see how a bond fund will be received by Hong Kong investors, who are perceived as more interested in high risk, high return.” The fund comes with a low minimum investment of $1000, and carries a front-end load of 5% and an annual management fee of 1%.
Potential new product offerings from PIMCO include distributing other Dublin-listed funds through HSBC or other distributors, or developing local debt market funds. This latter option will be difficult, because local markets aren’t sufficiently liquid or deep to accommodate PIMCO’s trading strategy. A third option is to develop a balanced fund, which would require cooperating with a fund manager specializing in equities. Baker notes these ideas are only at the initial stages and nothing is imminent. PIMCO is 70% owned by Allianz Asset Management.