Following Bill Gross' departure, Pacific Investment Management Company
(PIMCO) has designated two portfolio managers Alfred T. Murata and Mohit
Mittal to assume portfolio manager (PM) responsibilities over four
multi-sector closed-end funds (CEFs) that issue Fitch-rated preferred
shares (ARPS):
--PIMCO High Income Fund (NYSE: PHK)
--PIMCO Corporate & Income Strategy Fund (NYSE: PCN)
--PIMCO Income Strategy Fund (NYSE: PFL)
--PIMCO Income Strategy Fund II (NYSE: PFN)
The four funds manage approximately $3.3 billion of assets as of Aug.
31, 2014 and have $700 million of Fitch-rated ARPS outstanding. The
funds also draw on $460 million of reverse repurchase agreements as a
senior form of borrowing and utilize derivatives to reference foreign
currency and interest rate exposures. The funds continue to test with
ample asset coverage for the rated ARPS, and Fitch does not expect any
rating action as a result of the change in management. However, Fitch
will continue to monitor the situation and how the new leadership
performs.
The two new managers, Murata and Mittal, are both senior portfolio
managers and managing directors at PIMCO focusing on income and credit
strategies, with a particular focus on mortgage credit and corporate
credit, respectively. Mr. Murata manages or co-manages PIMCO Income
Opportunity Fund (PKO), PIMCO Dynamic Credit Income Fund (PCI), PIMCO
Dynamic Income Fund (PDI), Canadian-domiciled PIMCO Global Income
Opportunities Fund (PGI.UN) and PIMCO Income Fund (PONAX). Mr. Mittal
manages a variety of portfolios focused on investment grade credit,
total return and unconstrained bond portfolios. Murata has been with
PIMCO since 2001, while Mittal joined the firm in 2007. Previous
performance of funds managed by Murata ranges between the mid- and
high-end of Fitch's multi-sector closed-end fund peer group. The broad
investment process of the funds is expected to remain largely unchanged.
Fitch expects fund NAVs to experience minimal impact and closed-end
funds are shielded from direct investor withdrawals, protecting the
funds from any forced selling. So far NAVs have trended down 0.63% on
average (inline with the broader market), while secondary market common
stock prices fell by 6.88%, on average, before rebounding by 3.48% as of
close yesterday.
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