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With yields low, fixed-income funds are taking on more leverage to keep yields reasonable....

With yields low, fixed-income funds are taking on more leverage to keep yields reasonable. Pimco's giant upcoming Dynamic Credit Income Fund may borrow up to 42% of its net assets, according to a filing last week. The Dynamic Income Fund (PDI) has ridden leverage to return 29% (including dividends) in less than a year since it was launched. Fund manager Daniel Ivascyn was a buyer of 76K shares 2 weeks ago.
Comments (3)
  • Tack
    , contributor
    Comments (14117) | Send Message
     
    Levering up low-yield, fixed-rate bond funds, now, is like pushing the throttle forward on two trains racing toward each other.
    29 Jan 2013, 12:38 PM Reply Like
  • Micro_Cap_Maven
    , contributor
    Comments (120) | Send Message
     
    PDI is also short longer-term maturities, so there is a 'dynamic' element to this fund which should not be overlooked.
    29 Jan 2013, 01:22 PM Reply Like
  • turtleuofs
    , contributor
    Comments (231) | Send Message
     
    Exactly, this isn't your typical leveraged gov't bond fund. If you read PIMCO commentary you'll note they're even more worried about the bond bubble and rising interest rates than the next guy.

     

    I've been long since a week after the IPO and if you look at the chart you'll see how angry I am ;) Nothing like beating the S&P 500 in a fixed income fund over a period where treasury prices dropped about 5%
    29 Jan 2013, 02:33 PM Reply Like
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