Why is PIMCO particularly suited to navigating the high yield market in the current environment?
Jessop: High yield investing is about bottom-up individual company selection. PIMCO’s size, our extensive credit research capabilities, our global reach and our ability to interact directly with senior management of portfolio companies support our ability to make extremely informed decisions at the industry, company, capital structure and security level. However, as the recent crisis proved to many investors, having a macroeconomic framework can help provide context and direction to the bottom-up analyst. PIMCO’s high yield team benefits from our time-tested economic forecasting process. For example, in 2007 PIMCO was underweight high yield because spreads were extremely tight and the risk-to-reward ratios didn’t seem appropriate. As the global meltdown began, we became more defensive because of concerns about the lack of liquidity, widening spreads, rising defaults and falling recoveries. We were also concerned about the potentially disproportionate effect the economic crisis could ha
