Pimco Income Fund (any good?)

With T-bill interest rates going down, I had written earlier about my thought process in purchasing LionGlobal All Seasons (Standard) unit trust. 

To recap, I have a sizeable amount of cash and non-cash. Apart from maxxing out my SSB at $200k, I have cash in money market funds like Fullerton as well as cash in bank account. Finally, as I am almost at young senior status, I should start considering my CPF funds (above FRS) as near-cash (or at least a 5 year bond to hold between age 50 to 55).

So when my T-bills continue to mature, I should be on the look out for good replacements. Maybe a little more risk for a little more return.

Kyith in Investmentmoats has done multiple articles recently on PIMCO Income Fund. Not exactly sure why the love (or hate) for this fund in particular, but I guess it is a super popular fund so many readers will either be vested or thinking of investing in it.

I had never considered the fund before but his article piqued my interest so I went to have a deeper look. You can read Investmentmoats for more details on what the fund invests in, but after doing my own due diligence, I have decided the fund is not for me. 

Fundamentally, there's the issue of my portfolio construction. I'm not sure how to fit such a fund into my portfolio. It's basically asking me to pay the fund manager a bit more (1.05% expense ratio) and to accept more risk in the hope for better return. My view of fixed income is that it should be the lower volatility part of my portfolio, to compensate for the potential wild swings in the equities portion, so on that note, the PIMCO fund doesn't fit the bill for me.

As a second order issue, the data from FSMOne shows that its 3-year Annualised Volatility as well as Sharpe Ratio is worse than the LionGlobal fund. This is rather embarrassing for PIMCO. How can an actively managed fund be so volatile? 

As you can read from Kyith's article, a 6 month difference in when you entered the fund (buying in Jan versus July 2017) resulted in what could be 2.5% p.a. over 8 years turning into 1.35% over 8 years! This is not the type of volatility you want from a fixed income fund.

Conclusion?

I'm on the lookout for a lower volatility fund with decent sharpe ratio. I don't think the PIMCO meets those requires as its metrics are worse than the LionGlobal All Seasons fund. So I will stick with LionGlobal for now, but when I hit a certain amount of holdings, my usual practice is to diversify into a second fund, so I'll keep looking

 🐧🐧🐧

PIMCO Income Fund E Class JPY hedged and Admin Class  SGD hedged are two of the five best-selling fixed income funds on FSM

Comparing the SGD hedged class, it loses out to the All Seasons Fund in two critical metrics: Annualised Volatility & Sharpe Ratio

Higher Sharpe ratio means better risk adjusted returns. Lower volatility means exactly that, less volatile.