Pacific Investment Management Co. is planning to roll out a global credit fund, less than a year after its cio, Bill Gross, vilified the hedge fund industry in a written report. The new offering, called Diversified Credit Relative Value Fund, will employ mainly the actively managed portion of PIMCO's Diversified Income strategy with leverage, according to a Credit Suisse First Boston prime brokerage document obtained by Alternative Investment News, a CIN sister publication. The fund will invest in emerging market, global investment-grade corporate and high-yield corporate debt securities. A launch date has not been set.
Gross took aim at hedge funds in one of his famous monthly outlooks. "Hedge funds in reality are just unregulated banks, operating on a poorly disclosed amount of equity capital and taking the spread between their cost of funds and their riskier and longer dated assets," Gross wrote. "So if you are thinking about a hedge fund to bolster your portfolio returns, give it a long think. They're risky and they're generally overpriced. You can do better elsewhere or even on your own." A PIMCO official declined to comment. Calls to Gross were not returned.
The new fund's strategy seeks to "exploit the wide variety of anomalies, structural inefficiencies and market mis-pricings that PIMCO believes exist in the global credit markets," the document states. The fund will employ a significant number of security-specific strategies over time to reduce the overall risk of the portfolio. It will also have a credit spread duration limit. "The weighted average credit spread duration of either the long-only or short-only value of the investments in the portfolio (calculated separately) may not exceed eight times the duration of the 10 Year U.S. Treasury note." The fund carries a $5 million investment minimum, a 1.4% management fee and a 20% performance fee.
