PMJAX
PIMCO RAE US Small-A
Strategic Focus on U.S. Small Companies
The PIMCO RAE US Small-A fund stands out with its strategic focus on U.S. small companies, aiming for long-term capital appreciation. This fund invests at least 80% of its assets in small-cap stocks, providing investors with exposure to a segment of the market known for its growth potential. Managed by PIMCO, a leader in the investment management industry, the fund leverages a disciplined approach to identify undervalued opportunities within the small-cap space. This focus allows investors to tap into the dynamic and often underrepresented small-cap market, which can offer significant upside potential during periods of economic expansion. The fund’s commitment to small-cap equities is further emphasized by its minimal allocation to cash and other asset classes, ensuring that investors’ capital is primarily directed towards growth-oriented investments.
At A Glance
Executive Summary
PIMCO RAE US Small-A (PMJAX) targets U.S. small companies for long-term growth. With a 0.90% expense ratio, it offers a 1.10% yield and strong recent returns.
– Strong recent performance with a 46.83% one-year return. – Focus on U.S. small companies, offering growth potential. – Managed by PIMCO, a reputable fund family. – Diversified sector allocation with a focus on cyclicals and industrials.
– High beta of 1.29 indicates higher volatility. – Expense ratio of 0.90% is higher than some peers. – Limited exposure to large and medium cap stocks. – Negative ten-year return data.
Impressive Short-Term Performance
The PIMCO RAE US Small-A fund has demonstrated impressive short-term performance, particularly over the past year, with a remarkable 46.83% return. This performance outpaces its benchmark, the S&P 500 Total Return Index, which posted a 38.80% return over the same period. The fund’s ability to outperform its benchmark can be attributed to its strategic allocation towards cyclical and industrial sectors, which have benefited from recent economic recovery trends. Additionally, the fund’s top holdings, such as Abercrombie & Fitch Co and Dillard’s Inc, have contributed significantly to its strong performance. While the fund’s three-year and five-year returns of 9.61% and 17.17% respectively are commendable, the lack of ten-year return data suggests a relatively new or evolving strategy. Nonetheless, its recent performance highlights its potential to deliver substantial returns in favorable market conditions.
Navigating Volatility with a High Beta
The PIMCO RAE US Small-A fund exhibits a high beta of 1.29, indicating a higher level of volatility compared to the broader market. This suggests that the fund is more sensitive to market movements, which can be advantageous in bullish markets but may pose risks during downturns. The fund’s Sharpe ratio of 0.42 reflects its risk-adjusted return, suggesting that while it offers potential for high returns, it also carries a significant level of risk. The fund’s alpha of 7.99% indicates its ability to generate excess returns relative to its benchmark, showcasing effective management strategies. However, investors should be mindful of the fund’s downside risk, as indicated by its downside risk (UI) of 2.86 and a max drawdown of -9.3%. These metrics highlight the importance of considering one’s risk tolerance when investing in this fund.
Diverse Sector Allocation with a Cyclical Focus
The PIMCO RAE US Small-A fund’s portfolio is characterized by a diverse sector allocation, with a pronounced focus on cyclical industries, which constitute 28.25% of its holdings. This strategic emphasis on cyclicals positions the fund to capitalize on economic upswings, as these sectors typically perform well during periods of growth. Additionally, the fund has significant exposure to industrials (15.67%) and financials (12.70%), further enhancing its potential to benefit from economic recovery phases. The fund’s top holdings, including Abercrombie & Fitch Co and Dillard’s Inc, reflect its commitment to identifying value opportunities within these sectors. The fund’s minimal allocation to utilities and technology suggests a deliberate strategy to focus on sectors with higher growth potential. This sector composition aligns with the fund’s objective of achieving long-term capital appreciation through strategic investments in small-cap equities.
Yield and Income Strategy
The PIMCO RAE US Small-A fund offers a yield of 1.10%, which, while modest, provides a supplementary income stream for investors. This yield is competitive within the small-cap value category, where income generation is often secondary to capital appreciation. The fund’s income strategy is primarily driven by its focus on small-cap equities, which typically reinvest earnings to fuel growth rather than distribute dividends. As such, the fund may appeal more to growth-focused investors who prioritize capital gains over immediate income. However, the presence of a yield component can enhance the fund’s appeal to those seeking a balanced approach, combining growth potential with some level of income generation. This dual focus makes the fund a versatile option for investors with varying objectives.
Expense Ratio and Cost Considerations
The PIMCO RAE US Small-A fund has an expense ratio of 0.90%, which is relatively high compared to some of its peers in the small-cap value category. While this expense ratio reflects the costs associated with active management and the fund’s strategic focus on small-cap equities, it is important for investors to consider how these costs impact net returns. The fund’s strong recent performance may justify the higher expense ratio for some investors, particularly those who value the fund’s active management approach and potential for high returns. However, cost-conscious investors may wish to compare this fund’s expenses with those of similar funds to determine if the potential benefits outweigh the costs. Ultimately, the fund’s expense ratio should be weighed against its performance and strategic advantages when making investment decisions.
Competitive Landscape and Peer Comparison
In the competitive landscape of small-cap value funds, the PIMCO RAE US Small-A fund distinguishes itself through its strong recent performance and strategic sector allocation. Compared to similar funds such as Thrivent SmallCap Growth-S and Nuveen Quant Small/Mid Cap Eq A, PMJAX offers a higher one-year return of 46.83%, surpassing its peers’ returns of 36.82% and 43.92%, respectively. However, its expense ratio of 0.90% is higher than those of its peers, which may be a consideration for cost-sensitive investors. The fund’s focus on cyclicals and industrials sets it apart from competitors, providing a unique value proposition for investors seeking exposure to these sectors. While other funds may offer lower expenses or different sector focuses, PMJAX’s recent performance and strategic allocation make it a compelling choice for those prioritizing growth potential.
Future Outlook
The PIMCO RAE US Small-A fund is poised for potential growth, especially in bullish market conditions favoring small-cap stocks. Its focus on cyclicals and industrials could benefit from economic recovery phases, making it advantageous for investors seeking aggressive growth.
Ideal Investor Profile for PIMCO RAE US Small-A
The PIMCO RAE US Small-A fund is ideally suited for investors with a long-term investment horizon and a high risk tolerance. Its focus on U.S. small companies and cyclical sectors offers significant growth potential, making it an attractive option for growth-focused investors. The fund’s high beta and volatility suggest that it may be best suited for those who are comfortable with market fluctuations and are seeking aggressive capital appreciation. Additionally, the fund’s modest yield may appeal to investors looking for a balanced approach that combines growth with some income generation. Overall, PMJAX is a suitable choice for investors who are willing to embrace higher risk in pursuit of substantial returns, particularly in favorable economic conditions.
Current Market Context and Economic Conditions
The current market context is characterized by economic recovery and growth, which bodes well for the PIMCO RAE US Small-A fund’s focus on cyclical and industrial sectors. As interest rates remain relatively low, small-cap stocks are poised to benefit from increased consumer spending and business investment. However, investors should be mindful of potential tax implications associated with capital gains, as well as the impact of inflation on purchasing power. The fund’s strategic allocation to sectors that thrive in growth phases positions it to capitalize on these market conditions, making it a potentially advantageous investment in the current economic climate.
Similar Securities
Vanguard SmallCap Value IxFd-Inv – VISVX
Fidelity SmallCap Value Index Fd – FISVX
PIMCO RAE PLUS Small-Inst – PCFIX
Fidelity SmallCap Value – FCPVX
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