All investments contain risk and may lose value. Diversification does not ensure against loss. Investors should consult their investment professional prior to making an investment decision.
The asset class exposure model presented herein for illustrative purposes only. The allocation model is based on: S&P 500 (U.S. Equities), MSCI EAFE Net Dividend Index in USD (International Equities), MSCI Emerging Markets Index (Emerging Market Equities),Barclays Capital US Aggregate Index (U.S. Bonds), HFRI Fund Weighted Composite Index (Absolute Return), Dow Jones UBS Commodity TR Index (Commodities), Cambridge Associates LLC U.S. Venture Capital Index® (Venture Capital), Cambridge Associates LLC U.S. Private Equity Index® (Private Equity), NCRIEF Property Index (Real Estate). It is not possible to invest directly in an unmanaged index.
We employed a block bootstrap methodology to calculate volatilities. We start by computing historical factor returns that underlie each asset class proxy from January 1997 through the present date. We then draw a set of 12 monthly returns within the dataset to come up with an annual return number. This process is repeated 25,000 times to have a return series with 25,000 annualized returns. The standard deviation of these annual returns is used to model the volatility for each factor. We then use the same return series for each factor to compute covariance between factors. Finally, volatility of each asset class proxy is calculated as the sum of variances and covariance of factors that underlie that particular proxy. For each asset class, index, or strategy proxy, we will look at either a point in time estimate or historical average of factor exposures in order to determine the total volatility. Please contact your PIMCO representative for more details on how specific proxy factor exposures are estimated.
This material contains the opinions of the author but not necessarily those of PIMCO and such opinions are subject to change without notice. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.
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