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PIMCO Real Estate Real Return Strategy D Message Board

  • kingoftheroad2012 kingoftheroad2012 Mar 11, 2013 5:19 PM Flag

    Dont believe your leveraged against higher rates...

    Many here believe this fund can withstand a rising rate environment but you see the truth to this fallacy...

    May be a good time to lighten up


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    • Why? Why would rising interest rates effect PETDX? The only function of the bonds in its portfolio is as collateral for buying swaps and derivates that track its REIT benchmark. As interest rates rise and bond prices fall the fund simply has an increase in its dividend income to pass along to investors. If interest rates fall and bond prices rise then the value of their bond portfolio rises and the NAV increases. So explain why a rising interest rate will effect the NAV when the NAV is most effected by the rise or fall of the benchmark equity REIT index. Equity REITs are a hybrid asset class, offering yield and the possibility of capital appreciation. These firms generate income by managing properties and collecting rent. Why would an increase in interest rates effect equity REITS and how?

      This is your chance to explain your view. My experience with you is that you make statements like the one you have made here, but then cannot explain the rationale behind the claim and/or you simply do not understand how a particular investment works. So now is your opportunity. Explain it for us.

      • 4 Replies to fredkane3947
      • eeehhhmmm.. here it is....Mr Knowledge supporting a Petdx case as bond rates rise...

      • The explanation lies in the daily Nav results as rates have risen... Obviously the fund holdings are not balanced to the extent you have percieved/expressed in the past...

        Any classic lame dichotomy shall once again fall on deaf ears.

      • Fred: I agree with your statement below.

        "If interest rates fall and bond prices rise then the value of their bond portfolio rises and the NAV increases."

      • The words “affect” and “effect” are frequently misused and confused, one being used incorrectly in place of the other. But they have no senses in common. Both words can be used as either nouns or verbs, so that's not a foolproof distinction. But “affect” is almost always a verb, whereas “effect” is more commonly used as a noun than it is as a verb. “Affect” as a noun is almost entirely reserved for psychological jargon. Its use as a noun by a journalist is an affectation.

        “Affect” as a verb. (The norm) To have an influence on; to impress or to move; to produce a change in something or someone. Example:
        His study was intended to show how alcohol affects reaction time.

        “Effect” as a noun. (Common usage) Something brought about; a result. Example:
        They discussed the effect of the law on children.

        “Effect” as a noun. (Common usage) The way one thing acts upon another. Example:
        The effect of the law has been to increase the use of alcohol.

    • No need to lighten up now. Interest rates aren't going up anytime soon. Rising interest rates would cost the USA tons of money in interest and will NOT happen.

    • That's exactly what I've been in the discussion with Fred about.

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