Your Global Investment Authority pg Your Global Investment Authority © 2011 PIMCO advised funds are...

Your Global Investment Authority pg

Your Global Investment Authority

© 2011 PIMCO advised funds are distributed by PIMCO Investments LLC.

STEPPING OUT OF CASHStrategies for Putting Cash to Work


Agenda

2

This presentation was created by PIMCO Investments LLC and updated 8/31/11 unless otherwise indicated. It contains the current opinions of the presenter, which are subject to change without notice. This presentation does not represent a recommendation of any particular security, strategy or investment product. PIMCO advised funds are distributed by PIMCO Investments LLC, 1633 Broadway, New York, NY 10019, www.PIMCO.com/investments, 1-888-87-PIMCO. ©2011

1. Cash Balances on the Rise

2. The Risks of Over-Investing in Cash

3. Strategies for Putting Cash to Work

4. Taking Steps

Your Global Investment Authority pg3

Cash Balances on the Rise

Growth Has Stalled

Market Volatility

Asset Levels


1Q 2

007

2Q 2

007

3Q 2

007

4Q 2

007

1Q 2

008

2Q 2

008

3Q 2

008

4Q 2

008

1Q 2

009

2Q 2

009

3Q 2

009

4Q 2

009

1Q 2

010

2Q 2

010

3Q 2

010

4Q 2

010

1Q 2

011

2Q 2

011

Cash Balances on the RiseGrowth Has Stalled

4

Source: Bureau of Economic Analysis. As of August 2011.

QUARTER-OVER-QUARTER GROWTH IN REAL GDP

Per

cent

(%

)


Cash Balances on the RiseMarket Volatility

5

Source: CBOE Market Volatility (VIX) Index, Bloomberg.

VOLATILITY HAS INCREASED RECENTLY

0

10

20

30

40

50

60

70

80

90

Jan

-08

Mar-

08

May-0

8

Jul-

08

Sep-0

8

Nov-0

8

Jan

-09

Mar-

09

May-0

9

Jul-

09

Sep-0

9

Nov-0

9

Jan

-10

Mar-

10

May-1

0

Jul-

10

Sep-1

0

Nov-1

0

Jan

-11

Mar-

11

May-1

1

Jul-

11


Cash Balances on the RiseAsset Levels

6

Source: Strategic Insight Research; Federal Reserve.

INVESTORS TURN TO PERCEIVED SAFETY OF CASH

MM MF assets

Savings & MMDA

CD’s over $100,000

CD’s below $100,000

Bill

ions

($)


The Risks ofOver-Investing in Cash

Cash Returns Near All-time Low

Negative Real Returns

Low Yields Likely to Persist


The Risks of Over-InvestingCash Returns Near All-time Low

8

Past performance is no guarantee of future results. Source: U.S. Department of the Treasury. Month-end numbers unless otherwise noted. This chart is not indicative of the past or future performance of any PIMCO product. Treasury bills offer a fixed rate of return, with principal and interest payments government-guaranteed.

3-MONTH T-BILL YIELD NEAR ZERO 3-Month T-Bill Yield


The Risks of Over-InvestingNegative Real Returns

9

Past performance is no guarantee of future results. Source: U.S. Department of the Treasury. Month-end numbers unless otherwise noted. This chart is not indicative of the past or future performance of any PIMCO product. Treasury bills offer a fixed rate of return, with principal and interest payments government-guaranteed.

LOSING MONEY ON CASH AFTER INFLATION 3-Month T-Bill Yield

3-Month T-Bill Yield After Inflation


The Risks of Over-InvestingLow Yields Likely to Persist

10

FINANCIAL REPRESSION KEEPS RATES DOWN

Source: ISI Group. ISI composite is global developed short-term interest rates after inflation. Data through 5/31/11.

Global Real Short Rates


The Risks of Over-InvestingLow Yields Likely to Persist

11

“…Economic conditions . . . are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.”

— Federal Open Market Committee (FOMC) Press Release 9 August 2011


SOURCE: SEC Investment Act of 1940, § 270.2a-7 Money Market Funds. Sec 2a-7 Money Market Fund Regulatory Reform was enacted on January 27, 2010.

12

Money_market_phil_03

Weighted Average Maturity Liquidity

Daily Weekly

Weighted Average Life Tier 2 Securities

Old New

Maximum 90 Days

N/AN/AN/A5% Maximum, 13 Month Maximum

Maturity

Maximum 60 Days

10% Minimum30% MinimumMaximum 120 Days3% Maximum, 45 Day Maximum Maturity

The Risks of Over-InvestingRegulatory Reform Likely to Keep Money Market Yields Low

REVISED 2A-7 RULES FOR MONEY MARKET FUNDS


Strategies forPutting Cash to Work

Step In: Short-Term Bond Strategies

Step Up: Core Bond Strategies

Step Out: Income-Generating Bond Strategies

Step Further: Multi-Asset Strategies


Strategies for Putting Cash to WorkStepping Out on the Spectrum

14

PO

TE

NT

IAL

RIS

K

POTENTIAL REWARD

Cash

Short-termbonds

Core bonds

Income potential

THE RELATIONSHIP BETWEEN RISK AND REWARD

Timely opportunities

Pote

nti

al R

etu

rn

Risk


Strategy 1. Step In Strategy 2. Step Up Strategy 3. Step Out Strategy 4. Step Further

Goal: Use short-term bonds to take a small step up in return potential via a small step up in risk

Solution: Short-term bond strategies

Goal: Use investable assets to reestablish a core position

Solution: Core bond strategies

Goal: Use a portion of core assets to pursue income potential

Solution: Conservative multi-sector bond strategies

Goal: Use discretionary strategies that seek to capitalize on opportunities arising from today’s changing economic landscape

Solution: Actively managed multi-asset strategies

Strategies for Putting Cash to WorkStepping Out on the Spectrum


Strategies for Putting Cash to WorkStep In: Short-Term Bond Strategies

16

There is no guarantee that these objectives will be met.

Pursue increased return potential over cash

Preserve some liquidity

Increase return potential over cash (for small increase in risk)

Seek lower volatility

High-quality focus


Strategies for Putting Cash to WorkStep Up: Core Bond Strategies

17

Reestablish core holdings for longer-term return potential

For investable cash

Greater return potential (for moderate increase in risk)

High-quality focus

Reestablish bond market exposure



Strategies for Putting Cash to WorkStep Out: Income-Generating Bond Strategies

18

Pursue income potential through a broad-based, total return approach

Allocate a portion of core assets

Consistent dividend income from diversified sources

Rigorous risk management

Maximize income potential



Strategies for Putting Cash to WorkStep Further: Actively Managed Multi-Asset Strategies

19

Capitalize on sectors and asset classes that may benefit from the changing economy

Access broad range of asset classes

Active management in response to evolving risks and opportunities

Experience and expertise of recognized portfolio managers



Taking Steps

Analyze Your Cash Position

Re-Allocate Excess Cash

Look for the Right Investment Manager− Active Management

− Research and Resources

− Experience and Innovation

− A History of Risk-Managed Results


Important Information

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The Standard & Poor’s 500 Index is an unmanaged market index generally considered representative of the stock market as a whole.

The CBOE Volatility Index® (VIX®) is a key measure of market expectations of near-term volatility conveyed by S&P 500® stock index option prices.

One cannot invest directly in an index.

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