Pacific Asset Management, May 2017

A Unique Approach With Pacific FundsSM
Core Income

Join Pacific Funds Fixed Income portfolio manager David Weismiller and senior managing director Dominic Nolan as they discuss the investment approach for Pacific Funds Core Income. 

Transcript

Dominic Nolan: Pacific Funds Core Income is an intermediate‐term bond fund with an emphasis on investment-grade corporate debt. The fund also has the flexibility to invest across the credit and broad investment grade spectrum.

David Weismiller: We believe this approach provides a higher level of income while maintaining the attributes of preservation of capital and diversification that investors have come to expect from their fixed-income allocation.

Dominic Nolan: Most intermediate‐term bond funds focus on the non‐corporate areas of the investment-grade universe, such as Treasuries, Agencies, and Mortgages (see chart at 00:55). These areas represent over two-thirds of the Bloomberg Barclays U.S. Aggregate Bond Index, a broad fixed income benchmark. Pacific Funds Core Income is focused on a sector that represents approximately one quarter of the universe.

David Weismiller: While the yield investors receive from corporate debt can be attractive, it is important to understand the credit risk. We can actively mitigate this risk in different ways.

First, and probably most important, is being selective in what securities we choose. Since default risk tends to be the primary risk of corporate securities, understanding an issuer, or company, is critical. Our investment process is anchored in fundamental research, managed by an experienced team of professionals, and focused on analyzing individual credits. Over time, avoiding the defaults in corporate debt can help protect investor capital and favorably increase the risk/reward balance.

Second, we have the flexibility to invest in additional non‐corporate areas of fixed income, such as agencies or treasuries, which can not only diversify the risk of the portfolio but help decrease volatility in the event corporate debt experiences headwinds.

Dominic Nolan: In summary, Pacific Funds Core Income is aiming to deliver value through a focus on corporate debt securities with the flexibility to benefit from opportunities across the credit quality and investment-grade bond spectrum, while selectively investing in issues with which we have a high degree of conviction.

 

 

About Risk: All investing involves risks including the possible loss of the principal amount invested. Debt securities with longer durations or fixed interest rates tend to be more sensitive to changes in interest rates, making them generally more volatile than debt securities with shorter durations or floating/adjustable interest rates. Floating‐rate loans (usually rated below investment grade) and high‐yield/ high‐risk (“junk bonds”) have greater risk of default than higher‐rated securities/higher‐quality bonds that may have a lower yield. Interest rates and bond prices have an inverse relationship. The Fund is also subject to other risks including, but not limited to, liquidity risk, risk of default, foreign markets risk, and credit risk. Please see the Fund’s prospectus and/or summary prospectus for details on these and other risks associated with Pacific Funds Core Income.

This commentary represents the views of the portfolio managers at Pacific Asset Management as of May 2017, and are subject to change without notice as market and other conditions warrant. These views should not be construed as investment advice, an endorsement of any sector or index, or to predict the performance of any investment. All material is compiled from sources believed to be reliable, but accuracy cannot be guaranteed. Sector names in this commentary are provided by the Fund’s portfolio managers and could be different if provided by a third party.

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Pacific Life Fund Advisors LLC (PLFA), a wholly owned subsidiary of Pacific Life Insurance Company, is the investment adviser to the Pacific Funds. PLFA also does business under the name Pacific Asset Management and manages certain funds under that name.

Pacific Life Insurance Company is the administrator for Pacific Funds. It is not a fiduciary and therefore does not give advice or make recommendations regarding investment products.

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Investors should consider a fund's investment goal, risks, charges, and expenses carefully before investing. The prospectus and/or the applicable summary prospectus contain this and other information about the fund and are available from your financial advisor. The prospectus and/or summary prospectus should be read carefully before investing.

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Mutual funds are offered by Pacific Funds. Pacific Funds are distributed by Pacific Select Distributors, LLC (member FINRA & SIPC), a subsidiary of Pacific Life Insurance Company (Newport Beach, CA), and are available through licensed third parties. Pacific Funds refers to Pacific Funds Series Trust.

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No bank guarantee. May lose value. Not FDIC insured.