Secular Outlook

How Our Secular Outlook Informs Portfolio Construction

Marc Seidner, CIO Non-traditional Strategies, speaks to how our Secular Outlook is a differentiator in how we construct and manage portfolios.

Learn more: www.pimco.com/secular-outlook

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Marc P. Seidner, Chief Investment Officer, Non-traditional Strategies: Our secular forum is an important competitive advantage for PIMCO because it does help us differentiate from most that are focused on the short term.

Photographs from a PIMCO Secular Forum

In coming together for two and a half days as an organization, as a firm, we are also incredibly fortunate to be joined by some of the best thought leaders in the economic profession, in the industry, and in financial markets. We invite many outside presenters to come in and share their views and their perspectives with us,

and we are also incredibly fortunate to be joined by our global advisory board, which is chaired by Ben Bernanke, but also includes Gordon Brown and Ng Kok Song.

Text on Screen: PIMCO Global Advisory Board – Ben Bernanke, Joshua Bolten, Gordon Brown, Ng Kok Song, Anne-Marie Slaughter, Jean-Claude Trichet

Text on screen: Secular Outlook and the Investment Committee

Those sets of meetings are obviously brought together and used in our day-to-day investment committee deliberations.

Text on screen: Investment Committee- Regular meetings informed by Secular Forum conclusions

The investment committee meets three to four times a week for two to three hours a day and it is the basis of our discussions, the conclusions and the focus from our cyclical forums and our secular forums.

Text on screen: Active Risk Management

It's important to note that over our secular horizon, active risk management will be critically important. There are both left tail risks, the risk of deteriorating economic conditions that have to be guarded against in terms of securities selection and focus on valuation, and importantly, there are right tail risks as well, which we would define as the risk of inflation and the loss of purchasing power in a world where bonds yield very little in many developed markets. Much of risk management is, quite frankly, in many parts of our industry, backward looking, it's the last crisis, it's the last episode of volatility.

Shot of PIMCO employees working.

Our forward-looking risk process and part of our active risk management looks at scenarios that we think could occur,

Shot of a city, then gas station and then farm machinery.

it thinks about the risks from emerging markets, it thinks about the risks of inflation, it considers additional commodity volatility, it thinks about what could heretofore have been thought of as unimaginable.

Shot of building with U.K. flag on top of it, then shot of New York Stock Exchange building, then shots from the trading floor of the NYSE.

If we think about investing over the last three or four years or perhaps even the last four or five years, it has mattered much less what types of risks one has taken in their portfolio but how much risk one has taken. Betas have been an important driver of results.  And it is active management that focuses on what one owns, not how much one owns.

Text on screen: Secular Outlook Guides Our Investment Choices

The secular view to a large degree defines where we think the destination may be.  We may change course periodically, there may be diversions, there may be distractions, and that's what we review and update at our cyclical forums,

Shots of PIMCO employees working and shot of PIMCO Newport Beach office building.

and then the investment committee is there on a day-to-day basis to ensure that there aren’t major shifts, aren't major changes, aren't major deviations that we need to focus on a much more real-time basis, in addition to normal day-to-day investment activities such as the bottom-up and the top-down portfolio construction and investment activities.

For more information, visit pimco.com

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