Fund spotlight: PIMCO GIS Global Bond ESG

An interactive investor analyst offers a view on one of our ACE 40 funds.   

The ACE 40 fund
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The PIMCO GIS Global Bond ESG fund aims to maximise total return along with preserving capital. It is benchmarked against the Bloomberg Barclays Global Aggregate Index. Launched in early 2017, the fund has grown to be a size of around £1.1 billion.

It is a diverse, actively managed portfolio of global fixed-income securities which are selected according to PIMCO's internal environmental, social and governance (ESG) screening process. This consists of ESG exclusions to restrict investment in issuers fundamentally misaligned with sustainability practices, which include sectors such as controversial weapons, tobacco, adult entertainment and coal.

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Best-in-class ESG issuers

It invests in best-in-class ESG issuers that have attributes such as ambitious climate change strategies, a strong record on product safety and customer suitability, and diverse, independent board oversight. They also conduct engagement to work with issuers to change ESG-related business practices covering topics such as net-zero emissions targets, the gender pay gap and data security standards.

The fund is managed by a well-resourced team led by Andrew Balls, the managing director and chief investment officer of global fixed income at PIMCO.

What does it invest in?

The fund invests primarily in a diversified portfolio of investment-grade bonds from around the world, typically in developed markets, to capitalise on opportunities across the global landscape within an ESG framework. The fund is not constrained to investing in a single region. Investment grade refers to the quality of a company’s credit rating. Generally speaking, bonds rated investment grade have a lower risk of defaulting. 

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The portfolio is mainly made up of government-related bonds at around 55%, with investment-grade corporate credit at around 16%, emerging market local debt at around 8% and inflation-linked bonds at around 4%. The fund has a bias to the US at around 40%, followed by around 12% in the UK, 7% in Japan and 4% in China.

Some examples of holdings within the fund include the German government’s first Green Bond, which supports Germany’s sustainable finance programme, including clean technology and renewable energy projects. Another holding is The Ford Foundation Social Bond, where proceeds support and strengthen non-profit organisations that are advancing the fight against inequality. A third example is HSBC’s SDG Bond, which is driving HSBC’s sustainability policy with broad and proactive projects including affordable housing.

How has it performed?

Since launch in 2017, the fund has outperformed the Bloomberg Barclays Global Aggregate Index with returns of 3.1% versus 0.8% for the benchmark. Throughout 2020, the fund delivered returns of 4.2% against 2.3% for the benchmark. In the first quarter of 2020, the fund fell by 3% compared to a decline of 3.4% for the benchmark.  

So far in 2021, the fund delivered a loss of 5.3% versus a decline of 5.8% for the benchmark.  

• Click here for more information on this fund, including price, yield and charges

Why do we recommend it?

The PIMCO Global Bond ESG fund features on the ii ACE 40 as a Global Bond, Core recommendation. It also falls within the ACE ‘Considers’ category, meaning the fund carefully considers a wide range of ESG issues and themes when balancing positive and negative factors.

In addition to this, following the European Union Sustainable Finance Disclosure Regulation (SFDR), which helps investors to distinguish and compare between many sustainable strategies, the fund is SFDR Article 9. This means the fund has sustainable investment as a core objective.

As well as gaining from the highly experienced manager and team, the combination of a globally diversified fixed-income portfolio, offering the potential for investors to achieve returns consistent with other core bond strategies while also making a positive environmental and social impact through its ESG integration, makes this fund a unique option for investors.