PIMCO Commodity Real Return Strategy
PIMCO Commodity Real Return Strategy (MUTF:PCRDX) invests in “commodity-linked derivative instruments backed by a portfolio of inflation-indexed securities and other fixed income instruments.” In short, it keeps a firm foundation in high-yield investments like preferred stock and Treasuries while chasing returns in commodity investments.
Instead of investing in physical commodities, this PIMCO commodity fund purchases derivatives linked to the Dow Jones-UBS Commodity Total Return Index, helping it diversify without committing substantial capital. The fund then “collateralizes” these derivatives with an actively managed TIPS portfolio, according to the fund’s prospectus. It occasionally invests in leveraged notes to juice returns.
The biggest appeal of this fund should be to investors concerned about inflation. Because PCRDX is capitalizing on the inflation-hedging properties of both commodities and inflation-indexed bonds, this is a great place to stow your cash if you’re worried about inflationary pressures.
It has been managed since 2007 by Mihir Worah. The fund boasts the top five-star rating from Morningstar, a reasonable 1.24% expense ratio and no transaction fees.
Performance admittedly has been weak, lagging the market with just 4% returns year to date and a meager five-year return of just 0.5% annually. But that partially is because of plummeting interest rates, rather modest inflation and a drop in commodity demand. Again, an inflation hedge is the biggest draw here, so if you want to protect against a future inflationary trend, consider PIMCO Commodity Real Return Strategy.