September 20, 2011

PIMCO Launches Fund to Hedge Inflation Risk

Strategy includes TIPS, commodities, emerging market currencies, real estate investment trusts and gold

PIMCO announced Tuesday it has launched the PIMCO Inflation Response Multi-Asset Fund. According to the company, the fund is for investors “looking to hedge global inflation risks and take advantage of returns that inflation dynamics offer.” It will be managed by Mihir Worah, a managing director in Newport Beach, Calif.

“A long-term trend in rising commodity prices and weakening currencies of developed nations are stoking global inflation concerns,” a company release states. “Yet many investors own assets that are not highly correlated to inflationary pressure.”

Traditional inflation hedges are often limited in scope, it continues, which may be limiting in a multi-speed world.

“The PIMCO Inflation Response Multi-Asset Fund uses a multi-asset approach to identify and hedge risk in the best way to protect against inflation and may even take advantage of it, by investing in a range of assets that might respond to different types of inflation, such as Treasury Inflation Protected Securities, commodities, emerging market currencies, real estate investment trusts and gold,” the statement says. “PIMCO actively manages the asset allocation and underlying investments and incorporates tail risk hedging strategies intended to limit the impact of severe market shocks.”

“We believe that investors should always be prepared for the risk of rising inflation,” Worah said. “In fact, although commodity prices have eased lately, we see them continuing to rise over the next few years. A weakening U.S. dollar combined with what we see as the Federal Reserve’s inflationary bias will also add to this longer-term inflation pressure.”

Worah added: “Traditional inflation hedges often don’t provide an effective response to the wide-ranging drivers of inflation. The PIMCO Inflation Response Multi-Asset Fund takes a comprehensive approach to arm investors with key inflation-sensitive assets and PIMCO’s real return expertise helps us determine how much of each asset to buy in any given environment.”

Institutional shares of the PIMCO Inflation Response Multi-Asset Fund will trade under the ticker symbol PIRMX.

Additional tickers include “P” shares (PPRMX), “A” shares (PZRMX), “C” shares (PCRMX), “R” shares (PQRMX) and “D” shares (PDRMX).

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