Pimco: Making for a stronger defence

SMSF Service Provider Awards: Fixed income

SMSFs hold more than a quarter of their assets in cash and term deposits, according to the latest Australian Taxation Office statistics. But as interest rates have fallen, trustees are being encouraged to look elsewhere for returns on the defensive components of their portfolios.

This environment is providing an opportunity for PIMCO, winner in the fixed income category of the CoreData SMSF Awards, to begin a conversation with SMSF trustees.

“Cash has been a reasonable place to leave your assets when you get 5 to 6 per cent, it’s not when you get 2 per cent, with term deposit rates at 3 to 4 per cent that’s not the option it used to be.” PIMCO head of global wealth management for Australia Peter Dorian says.

Instead, Dorian suggests SMSFs consider moving some of their cash allocations into fixed income.

“In a bond fund you get exposure to government, semi-government, corporate debt and mortgages. There’s a wide range of assets that’s collectively going to give you a better rate of return than cash,” he says.

He argues SMSFs have been slow to introduce fixed income into their portfolios. “Part of that has to do with access. Self-managed super fund trustees often run their funds through an online broker or a separately managed account, so the inclusion of a managed fund has been difficult,” he says.

That began to change earlier this year when commonwealth government bonds were listed on the Australian Securities Exchange (ASX). From 2014, managed funds will be also listed on the ASX through the Clearing House Electronic Subregister System (CHESS).

PIMCO intends to make its funds available through CHESS from March or April 2014, which will provide trustees with direct access to the products.

The manager’s wholesale funds are currently available to SMSFs through Equity Trustees. The manager offers a wide range of actively managed funds from low-risk, short-duration investments, like the Australia Focus Fund, to the growth-oriented Emerging Markets Bond Fund, which offers exposure to emerging debt markets.

The PIMCO EQT Wholesale Australian Focus Fund returned 5.79 per cent over the three years to 30 September, and 2.86 per cent over one year. The PIMCO EQT Wholesale Emerging Markets Bond Fund gained 7.16 per cent over three years, although it lost 2.25 per cent over one year.

Manusha Samaraweera collected the award on behalf of PIMCO.

More SMSF Service Provider Award winners

  • Perpetual: Australian share fund
  • BGL: SMSF accounting software/administration
  • Magellan: International shares
  • Macquarie Adviser Services: Cash and accounting
  • Colonial First State: Investment platforms
  • Multiport: SMSF administration
  • TAL: Life insurance
  • ING Direct: Term deposits
  • AMP Capital: Commercial property
  • AMP Bank: SMSF term deposits
  • NAB: SMSF property loans

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