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PLVVX Has Fallen Considerably YTD, Underperforming Its Benchmark

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Dec. 15 2015, Updated 10:26 a.m. ET

RAE low volatility portfolio

The primary aim of the PIMCO RAE Low Volatility Plus Emerging Fund Class A (PLVVX) alternative mutual fund is to outperform the MSCI Emerging Markets Index. According to the fund’s website, PLVVX provides access to research affiliates equity (or RAE) low volatility, a fundamentally weighted, smart beta-based equity strategy that focuses on lower volatility and higher income stocks plus an additional complementary source of alpha potential.

PLVVX gets exposure to securities economically tied to emerging market countries using the popular long/short hedge fund strategy. The below graph compares the hypothetical growth of $100 invested in PLVVX and its benchmark since January 1, 2015.

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Underperformer

As you can see in the graph, PLVVX has failed to outperform its benchmark, the MSCI Emerging Markets Index, in this hypothetical scenario. The underlying index is a free float-adjusted market capitalization index designed to measure equity market performance of emerging markets.

Weak economic positions of developed countries such as the United States and China have also affected the growth of emerging market countries. This has resulted in PLVVX and the index falling considerably this year. PLVVX has given a negative year-to-date (or YTD) return of 24%.

PIMCO’s fund

As of December 11, 2015, PLVVX was managing assets worth $3.3 billion. The fund is currently managed by Sudi Mariappa from PIMCO. The primary holdings of PLVVX consist of fixed income securities of some major telecom sector companies such as AES (AES), Verizon Communication (VZ), AT&T (T), and Sprint (S).

In the next article, we’ll look at PLVVX’s investment methodology.

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