Understanding Investing

Reading the Road Ahead: Behind the Scenes at PIMCO’s Economic Forums

Before Economic Forums were mainstream on Wall Street, our investment professionals were gathering to identify economic and market trends for our clients. Decades later, the cornerstone of our process is stronger and more important than ever.

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Dan Ivascyn: We held the first economic forum in the 1970s. Today they still serve the same purpose, they are a way to think about the trends that could impact economies and markets for months and years to come. They ultimately help us read the road ahead.

Tiffany Wilding: We're always thinking about the next forum. What are the topics? What should we focus on? What are the market themes?

Dan Ivascyn: Goal of the forums is to gain a better understanding of key economic themes that are going to impact financial markets.

Joachim Fels: Develop debate and agree on a macroeconomic narrative.

Lupin Rahman: Means that we're able to take those conditions and apply them to the assumptions that we're making for each country's bottom up macro outlook. That very structured global view is incredibly important in determining how we position ourselves.

Joachim Fels: The secular forum is an annual event to focus on longer term trends, longer term impact on the economy and financial markets. In addition to the annual secular forum, we do these quarterly cyclical forums.

Tiffany Wilding: Cyclical outlook is something like 12 months to 18 months, whereas, a secular outlook is something like five years.

Steve Rodosky: The whole thing is a story with a beginning, a middle, and an end. And the ending is what that portfolio looks like.

Lupin Rahman: PIMCO's focus on listening to diverse opinions and really thinking outside the box is really, really unique.

Tiffany Wilding: About a month before we ask all of the regional committees and economist actually come up with their forecasts for GDP, for inflation, for the unemployment rate, for their particular regions, for monetary policy, for fiscal policy. Assign people to lead each session within the forum after kind of devising that agenda.

Stephen Chang: We have to really tune up on our intellectual fitness to be ready for the debate and the internal sparring of ideas.

Steve Rodosky: Second guess everything going into a debate and don't start off with a full set of assumptions.

Dan Ivascyn: It's an attempt to combat group think, elevating contrarian views, challenging our current thinking. And it allows us to solicit feedback from a wider range of individuals. People that are outside the day-to-day investment decision making process that could have a unique perspective.

Christian Stracke: Back in 2016, before the election, we were having a pretty intense debate with Ben Bernanke. There was an extraordinary debate, and it was a great example of how at PIMCO, there's nothing sacred.

The level of debate, the level of discourse, the intensity of the debate, it's a very non-hierarchical process,

Steve Rodosky: so it's common to have a vice-president disagreeing with a managing director, and that keeps things exciting. One of the key characteristics of our forum process is inviting every year's MBA class. It's an opportunity for them to show the rigor and substance of what they've spent their time learning on over that first year.

Joachim Fels: We always try to think in scenarios. We try to develop bull cases and bear cases. I don't cling to just one baseline scenario.

Steve Rodosky: Try and point out something that was either looked over or not enough time was spent on it that it might come back to haunt us. Find the Lego in the carpet before you step on it.

Dan Ivascyn: There have been certainly instances where we've discussed key trends that have really driven returns. Probably the best example, related to the housing market in the years, leading up to the global financial crisis, with a focus on aggressive underwriting and a lot of froth in the US, that’s an example we began to uncover these key themes and trends back in 2004 because we played great defense on behalf of clients we are able to go offense on their behalf for many years to come.

Tiffany Wilding: it allows us to think about where markets are going, where the economies are going, but it also allows us to think about risks. And in terms of portfolio management, it's all about managing the risks. Those are the kinds of things that help clients active management instead of passive. And we think year after year, that's providing our clients value.

Christian Stracke: Frankly, I'm not really sure how you can operate without this kind of a common baseline. Some of our competitors, are not integrated the way that we are. And what you might end up with is kind of a hodgepodge of different economic views, maybe explicit, but often implicitly baked into a lot of recommendations and positions.

Joachim Fels: The forum doesn't end with the forum. In the days after, we discuss the conclusions. We then formulate the implications for the positioning and our clients' portfolios.

Lupin Rahman: What has always struck me is that, regardless of which country I'm in, they will always ask me about PIMCO's views on the treasury market, our global macro views, how is PIMCO thinking about current market conditions and the state of the financial markets. Not only our clients, but essentially a large part of our counterparties really value what PIMCO thinks.

Christian: We have a bit of an edge in economic thinking.

Steve Rodosky: customers should find confidence in the fact that we're constantly trying to make ourselves a better firm.

Joachim Fels: The forum process has helped us to be successful in our investment process for the past 50 years. This is our 50th anniversary, and I'm sure it will help us to do more of the same for many years to come.

Disclosure


Statements concerning financial market trends or portfolio strategies are based on current market conditions, which will fluctuate. There is no guarantee that these investment strategies will work under all market conditions or are appropriate for all investors and each investor should evaluate their ability to invest for the long term, especially during periods of downturn in the market. Outlook and strategies are subject to change without notice.

This material contains the opinions of the manager and such opinions are subject to change without notice. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

PIMCO as a general matter provides services to qualified institutions, financial intermediaries and institutional investors. Individual investors should contact their own financial professional to determine the most appropriate investment options for their financial situation. This is not an offer to any person in any jurisdiction where unlawful or unauthorized. | Pacific Investment Management Company LLC, 650 Newport Center Drive, Newport Beach, CA 92660 is regulated by the United States Securities and Exchange Commission. | PIMCO Europe Ltd (Company No. 2604517) is authorised and regulated by the Financial Conduct Authority (12 Endeavour Square, London E20 1JN) in the UK. 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W2765338E) are authorised and regulated by the German Federal Financial Supervisory Authority (BaFin) (Marie- Curie-Str. 24-28, 60439 Frankfurt am Main) in Germany in accordance with Section 15 of the German Securities Institutions Act (WpIG).  The Italian Branch, Irish Branch, UK Branch and Spanish Branch are additionally supervised by: (1) Italian Branch: the Commissione Nazionale per le Società e la Borsa (CONSOB) in accordance with Article 27 of the Italian Consolidated Financial Act; (2) Irish Branch: the Central Bank of Ireland in accordance with Regulation 43 of the European Union (Markets in Financial Instruments) Regulations 2017, as amended; (3) UK Branch: the Financial Conduct Authority; and (4) Spanish Branch: the Comisión Nacional del Mercado de Valores (CNMV) in accordance with obligations stipulated in articles 168 and  203  to 224, as well as obligations contained in Tile V, Section I of the Law on the Securities Market (LSM) and in articles 111, 114 and 117 of Royal Decree 217/2008, respectively. 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CMR2021-1007-1861852

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