We talked to some of the investing pros at Pimco, the world's largest bond firm with close to $2 trillion under management, about their best investing ideas and their outlooks.
Daniel Ivascyn, a deputy chief investment officer who was also Morningstar's fixed-income fund manager of the year for the U.S. in 2013 notes, "2014's a bit more of a challenging year in finding value in marketplace.” But he and others we spoke with think in this current low volatility, low interest rate environment, there are some very attractive opportunities in the emerging markets.
1. Brazil: Ivascyn tells us they have a meaningful position in Brazilian government bonds. "Even though there are significant challenges, we don’t think they’re a significant default risk," he says. "So we’ve been buying their debt because they have some of the highest real interest rates in the world."
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Presently, you can get a 12% nominal interest rate and 6% real interest rate on the 10-year Brazilian bond (in local currency), managing director and generalist portfolio manager Saumil Parikh explains. ”To put that in context, those are the types of returns that equities have generated over the last hundred years ... It’s one of the only things out there that is liquid, cheap and attractive.”
2. Mexico: Lupin Rahman, executive vice president on emerging markets team, tells us they also find Mexico attractive. Check out the video to see why, and which investments they like. Pimco is not alone here. Larry Fink of BlackRock goes further in singing Mexico's praises, writing in a blog post Wednesday, "If I were starting my career, especially if I lived in a nation where I couldn’t explore my full potential, I’d try my luck in Mexico. Why? Because Mexico is finally beginning to unlock its true potential as an economic powerhouse."
3. Certain closed end bond funds: Shifting away from emerging markets, founder and CIO Bill Gross calls out this investment structure as his best idea now for individual investors. Gross says he buys them personally on a daily basis, and that provide yields of 7 to 8% -- not risk-free but, in some cases, tax-free. Watch the video for some of the recent picks he gave to Barron's. Closed end funds are investment companies whose shares are traded on the open market, like a stock or an ETF, according to Morningstar -- here's more on how they work.
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