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Strategy Overview

The bank loan market – or “leveraged loan” market, as it is sometimes known – comprises debt from companies with below–investment grade credit ratings. Bank loans are typically secured with a lien on the company’s assets. They also generally rank senior to the company’s other debt and offer higher credit ratings, or less risk and more collateral backing, than unsecured bonds. Companies tap this market predominantly to fund mergers & acquisitions, leveraged buyouts or for general corporate purposes.

PIMCO’s Bank Loan universe includes primarily the upper tiers of the U.S. bank loan market that are mainly secured by first-lien asset obligations. We believe that in this market environment first-liens provide better compensation due to their higher underlying asset quality and liquidity. We do take exposure to second-lien debt, albeit at much more modest levels, when valuations relative to associated risks merit investment.

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Disclosures

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 certain risks including market, interest-rate, issuer, credit, and inflation risk. There is no assurance that the liquidation of any collateral from a secured bank loan would satisfy the borrower’s obligation, or that such collateral could be liquidated. Bank loans are often less liquid than other types of debt instruments. Some debt instruments may include senior and subordinated and secured and unsecured debt obligations (including investments in the senior, subordinate, hybrid debt instruments, and Collateralized Debt Obligations or CDOs and Collateralized Loan Obligations or CLOs). General market and financial conditions may affect the prepayment of bank loans, as such the prepayments cannot be predicted with accuracy. High-yield, lower-rated, securities involve greater risk than higher-rated securities; portfolios that invest in them may be subject to greater levels of credit and liquidity risk than portfolios that do not. 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 and each investor should evaluate their ability to invest for a long-term especially during periods of downturn in the market. Diversification does not ensure against loss.

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.