Text on screen: PIMCO
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Text on screen: Candice Stack, Head of Client Management, Americas
Candice: What's our kind of broader view in terms of what clients and investors can think from a forward-looking return perspective?
Text on screen: Daniel J. Ivascyn, Group Chief Investment Officer
Daniel Ivascyn: The challenge going forward is going to be that valuations across nearly all areas of the financial markets are relatively expensive. We don't necessarily think we're bubble territory, but I think it's important for investors to acknowledge that valuations are stretched under any type of historical metric.
And for that reason, for investors at this point of the recovery period with so much economy fragility, people just have to being their return expectations down a bit lower than they've grown accustomed to.
Text on screen: The reality of a low-return environment with higher volatility ahead
And then unfortunately of course, on the other side of the ledger, we expect volatility to be elevated. So low returns, higher volatility is the exact opposite of what we look for as investors. And it's going to create a much more challenging environment over the next 3 to 5 years than we've become accustomed to.
Candice Stack: Any final words in terms of investment implications, or considerations, as so many of our clients look to navigate these disruptions?
Dan Ivascyn: Going back to my initial points, when comparing the level of yields, the level of spreads, the level of equity markets from a valuation perspective today versus almost 12 years ago during the last crisis, they're high. And in some sense, we may have reached something resembling the destination in terms of beta returns. Which means on a go-forward basis, having flexibility in terms of a mandate, focusing on good old-fashioned relative value, alpha creation, over the next 3 to 5 years, is likely to be a much more significant contributor to overall returns than it's been over the more recent history.
So again, patient, flexible capital, taking a very active approach to industry security and sector selection, we do think will pay dividends over the next 3 to 5 years. And of course, we remain very, very diligent and focused on of course delivering in terms of investment returns.
Text on screen: For more insights and information, visit pimco.com
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Please note that the following contains the opinions of the manager as of the date noted, and may not have been updated to reflect real time market developments. All opinions are subject to change without notice.
All investments contain risk and may lose value.
Alpha is a measure of performance on a risk-adjusted basis calculated by comparing the volatility (price risk) of a portfolio vs. its risk-adjusted performance to a benchmark index; the excess return relative to the benchmark is alpha
Beta is a measure of price sensitivity to market movements. Market beta is 1.
Statements concerning financial market trends or portfolio strategies are based on current market conditions, which will fluctuate. There is no guarantee that these investment strategies will work under all market conditions or are appropriate for all investors and each investor should evaluate their ability to invest for the long term, especially during periods of downturn in the market. Outlook and strategies are subject to change without notice.
This material contains the 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. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.
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