Here’s what could be one of PIMCO’s worst-kept secrets: its portfolio managers are not just portfolio managers. They also spend nearly half of their time trading.
“Being in the trenches is one of PIMCO’s secrets,” reported Jerome Schneider, managing director in PIMCO’s Newport Beach, California headquarters, who runs the short-term trading desk. Speaking Thursday at the Morningstar ETF Conference in Chicago, Schneider reported that trading takes up 40% to 50% of his day.
“Even Bill Gross trades to this day,” he said.
Schneider’s general session presentation focused on PIMCO’s “new neutral” strategy and the role of active management.
“What makes a good active manager?” asked Schneider.
“For an active ETF to be successful, you have to have an investment process,” Schneider added. “You have to have the understanding from the top down: what’s going to impact the portfolio, understanding regulatory pressures, understanding secular pressures, understanding global growth trends and inflation pressures, understanding demographics.”
ETFs began as passive index products, but active ETFs really got their start in fixed income and have only started to come to prominence over the past five years.
“It’s a transformational period right now,” he said. “We have to think about … how fixed income can be a core attribute in the portfolio allocation, even in volatile times, even in situations where interest rates may be increasing over the next few years.”