David Fisher, Head of Traditional Product Strategies: Liquidity has been a topic of late, with a lot of investors concerned about the liquidity risk embedded in their portfolios. So, could you give us some thoughts as to how the investment committee is thinking about liquidity in this environment, and managing the liquidity risk in various portfolios?

Dan Ivascyn, Group Chief Investment Officer: Liquidity management’s got to be at the top of everyone’s mind. And it continues to be at PIMCO. What we focus on, not only attractive and sufficient diversity across portfolios, but enough portfolio flexibility so ideally we can be liquidity providers to others in the market that need it at different points in time.

We saw this back during the global financial crisis, we’ve seen it during periods over the course of this last decade, even late last year. The fourth quarter of 2018 was a very volatile event, and an event where people were searching for liquidity that wasn't there, to their liking.

Shots of PIMCO employees working

Again, this remains an important area of focus for PIMCO. It’s an area of the markets — or areas of portfolio management where we’ve handled ourselves well. But you never want to be complacent. You want to have a good handle on liquidity. And again, that allows you to go on the offense when volatility hits markets and other participants ask for liquidity, that’s the best time to provide it, and a time where we think we can add value to clients, having that more defensive mindset.

David: Great. Thanks for joining us today, Dan, and thanks to you all as well.

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DISCLOSURE

Past performance is not a guarantee or a reliable indicator of future results.

All investments contain risk and may lose value. Investing in the bond market is subject to risks, including market, interest rate, issuer, credit, inflation risk, and liquidity risk. The value of most bonds and bond strategies are impacted by changes in interest rates. Bonds and bond strategies with longer durations tend to be more sensitive and volatile than those with shorter durations; bond prices generally fall as interest rates rise, and low interest rate environments increase this risk. Reductions in bond counterparty capacity may contribute to decreased market liquidity and increased price volatility. Bond investments may be worth more or less than the original cost when redeemed. Investing in foreign-denominated and/or -domiciled securities may involve heightened risk due to currency fluctuations, and economic and political risks, which may be enhanced in emerging markets. High yield, lower-rated securities involve greater risk than higher-rated securities; portfolios that invest in them may be subject to greater levels of credit and liquidity risk than portfolios that do not. Inflation-linked bonds (ILBs) issued by a government are fixed income securities whose principal value is periodically adjusted according to the rate of inflation; ILBs decline in value when real interest rates rise. Treasury Inflation-Protected Securities (TIPS) are ILBs issued by the U.S. government. Mortgage- and asset-backed securities may be sensitive to changes in interest rates, subject to early repayment risk, and while generally supported by a government, government-agency or private guarantor, there is no assurance that the guarantor will meet its obligations.

Sovereign securities are generally backed by the issuing government. Obligations of U.S. government agencies and authorities are supported by varying degrees, but are generally not backed by the full faith of the U.S. government. Portfolios that invest in such securities are not guaranteed and will fluctuate in value.

There is no guarantee that these investment strategies will work under all market conditions or are suitable for all investors and each investor should evaluate their ability to invest long-term, especially during periods of downturn in the market. Investors should consult their investment professional prior to making an investment decision.

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