Retail investors don’t have access to hedge funds. Modern investment strategies like long or short, market neutral, global macro, and distressed debt are used by hedge funds to earn profits and minimize their sensitivity towards the market’s ups and downs. Hedge funds also help in portfolio diversification. Alternative mutual funds seek to mimic these leading hedge fund strategies to allow retail investors to invest in a fund that has hedge fund-like characteristics. The PIMCO RAE Low Volatility Plus International Fund – Class A (PLVBX) is an alternative fund that uses a long or short hedge fund strategy to achieve its investment objective.
The above chart compares PLVBX’s historic return performance with the performance of its benchmark the MSCI EAEF Net Dividend Index.
Since its inception on December 31, 2013, PLVBX had a flat performance compared to its peer. It managed to outperform its index considerably YTD (year-to-date) in 2015 but it still gave negative returns. PLVBX has an international geographic focus. It’s invested in the S&P 500 Index’s (VFINX) holdings.
Currently, PLVBX is managed by Sudi Mariappa, Mohsen Fahmi, and Robert Arnott from the PIMCO Investment Management firm. Its benchmark MSCI EAFE Net Dividend Index is an unmanaged index. It’s comprised of issues from Europe, Australia, and the Far East represented in the US dollar on an unhedged basis. Some of PLVBX’s top holdings are corporate bonds and notes of various firms like Bank of America (BAC), Ally Financial (ALLY), General Motors (GM), and Citigroup (C).
In the next part, we’ll compare PLVBX’s performance with its peers.