Pimco PHK, a closed-end fund, has a unique investment strategy that focuses on high-yield bonds.
The fund's investment objective is to provide a high level of current income and total return, primarily through investment in high-yield bonds.
Pimco PHK has a long history, having been established in 2003, and has a strong track record of generating income for its investors.
The fund's average annual total return over the past 10 years is around 8%, which is a notable achievement in the high-yield bond market.
Risk and Reward
The PIMCO High Income Fund, PHK, has been a topic of discussion among investors, and one thing that's often debated is its risk-reward profile. The fund has a history of underperformance compared to its peers.
PHK has struggled to deliver on its promise of providing high income to investors, and this lack of value proposition is a major concern. The fund's closed-end structure also adds to its complexity and potential risks.
In the past, I've advised readers to avoid PHK due to its lack of value proposition, and this sentiment is still shared by many investors today.
Unnecessary Risk
When considering investments, it's essential to evaluate the potential risks involved. A fund with a weak distribution history and unnecessary risk is a red flag.
PIMCO High Income Fund has experienced a 66% price decline since inception. This significant drop in value is a cause for concern.
Investors seeking supplemental income may be drawn to the fund's high dividend yield of 11.3%. However, this alone may not be enough to outweigh the risks.
A 66% price decline is a substantial drop, and it's natural to wonder if it's a sign of a larger issue.
Risk-Reward Doesn't Excite Me
The PIMCO High Income Fund has a 66% price decline since inception, which is a significant drop. This fund offers a high dividend yield of 11.3%, making it attractive for income-focused investors, especially retirees seeking supplemental income.
The fund's share price performance has been volatile, but it has outperformed domestic bond indices in some periods. However, other closed-end peer funds have higher yields, which is worth considering.
A high current yield of 12.03% is offered by the PIMCO High Income Fund, but it's essential to weigh this against the fund's share price performance. The fund has not cut its distribution despite the negative impact of rising interest rates, which is a positive sign.
The fund's high yield is one of the highest in the market, but it's also very expensive given the risks involved. Real income growth is still negative, so many people need options to increase the money coming in, but the PIMCO High Income Fund's high price may not be the best option.
CEF Update and Analysis
PIMCO's CEFs have seen a surge in distribution coverage, coinciding with the retirement of auction-rate preferreds.
Distribution coverage for PIMCO's Muni CEFs has increased, but the premium mystery remains.
The PIMCO CEF taxable suite has continued to deleverage despite NAVs holding steady through February, possibly due to a low level of net income.
PIMCO took advantage of the recent back-up in yields and yield curve disinversion to add assets across the taxable suite.
The Boards of Trustees/Directors of the PIMCO closed-end funds have declared a monthly distribution for the funds, as seen in recent press releases.
PIMCO High Income Fund offers high yields, but has a history of shrinking distributions year after year, making investors question its value proposition.
Despite the challenges, PIMCO's CEFs have shown resilience, with some funds continuing to declare monthly distributions.
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