PIMCO Real Return Practice

Recognizing that inflation is a key risk factor for asset returns and that often their liabilities are in real (inflation-adjusted) terms, investors are increasingly cognizant of the need for inflation hedges. Investments in “real return” strategies provide an inflation hedge and can also offer important diversification for a portfolio.

PIMCO offers a broad range of real return products to meet investors’ needs:

  • Inflation-linked bond (ILB) strategies – This core real return strategy offers liquidity, low credit risk, and a direct link to inflation. In Europe, PIMCO offers three versions of this strategy:
    • Global Real Return strategy (either global U.S. dollar–denominated, or hedged to major currencies)
    • Euro Real Return strategy
    • U.K. Sterling Inflation-Linked strategy
  • Commodity index strategies – When conservatively managed, this asset class can provide a hedge to inflation “surprises,” and historically has had strong diversification characteristics.
  • All Asset strategies – The UK All Asset strategy employs tactical allocation across a full spectrum of asset classes and feature an explicit real return objective, with a long-term investment objective of UK RPI +4% (RPI = Retail Price Index).

What are Inflation Linked Bonds?

How Large are the Inflation Linked Bond Markets?

Applications for Real Return Products

PIMCO Inflation Linked Bond Management Experience

Investment Philosophy for Real Return Management

Sources of Added Value Performance

Risk Management/Controls


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 the current low interest rate environment increases this risk. Current 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. 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. Commodities contain heightened risk including market, political, regulatory, and natural conditions, and may not be suitable for all investors. The value of real estate and portfolios that invest in real estate may fluctuate due to: losses from casualty or condemnation, changes in local and general economic conditions, supply and demand, interest rates, property tax rates, regulatory limitations on rents, zoning laws, and operating expenses. 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. 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. PIMCO strategies utilize derivatives which may involve certain costs and risks such as liquidity, interest rate, market, credit, management and the risk that a position could not be closed when most advantageous. Investing in derivatives could lose more than the amount invested. The credit quality of a particular security or group of securities does not ensure the stability or safety of the overall portfolio. 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. Diversification does not ensure against loss. Investors should consult their investment professional prior to making an investment decision.

The Consumer Price Index (CPI) is an unmanaged index representing the rate of inflation of the U.S. consumer prices as determined by the U.S. Department of Labor Statistics. There can be no guarantee that the CPI or other indexes will reflect the exact level of inflation at any given time. It is not possible to invest directly in an unmanaged index.

This material contains the current opinions of the manager 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.