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Pimco shutters RAE Worldwide Fundamental Advantage PLUS Fund
April 28, 2017 / 3:55 PM / 5 months ago

Pimco shutters RAE Worldwide Fundamental Advantage PLUS Fund

The offices of Pacific Investment Management Co (PIMCO) are shown in Newport Beach, California August 4, 2015. REUTERS/Mike Blake

NEW YORK (Reuters) - Pacific Investment Management Co on Friday liquidated its RAE Worldwide Fundamental Advantage PLUS Fund, a global-neutral fund which had more than $4 billion in assets under management in 2014, according to the Newport Beach, California-based firm’s website.

The portfolio’s strategy included long exposure to a portfolio of stocks through the “RAE Fundamental U.S. Large Model Portfolio” and short exposure to the S&P 500 Index, while overlaying this equity market neutral exposure with absolute return bond alpha strategy through “AR Bond Alpha Strategy”.

The RAE Fundamental U.S. Large Model Portfolio stocks are selected by Pimco’s long-time subadviser, Research Affiliates, LLC, which was founded and chaired by Rob Arnott, known on Wall Street as the “godfather of smart beta.”

“We constantly review our suite of strategies and may liquidate a fund from time to time if we feel it no longer serves our clients needs,” Michael Reid, spokesman for Pimco, said in a statement to Reuters. “We are committed to RAE and will be expanding our RA relationship in equities.”

Pimco, a unit of Munich-based insurer Allianz SE (ALVG.DE), had $1.51 trillion in assets, has collaborated with Arnott’s firm Research Affiliates for more than a decade.

In 2015, Pimco expanded Pimco’s RAE Fundamental lineup, which uses Research Affiliates’ “smart beta,” or “fundamental indexation,” strategy of selecting, weighting and rebalancing holdings on the basis of characteristics other than market capitalisation.

Two years ago, Pimco introduced a slate of six new equity funds in collaboration with Research Affiliates to cover U.S. large, U.S. small, international, global, global excluding U.S. and emerging markets.

The RAE Worldwide Fundamental Advantage PLUS Fund made a big comeback in terms of returns of 13.03 percent. Still, it was not enough to offset years of deep underperformance compared with the fixed-income market benchmark, the Bloomberg Barclays US Aggregate Bond Total Return index, or its peers in Morningstar’s Market Neutral category.

The fund’s assets stood at just $316 million as of March 31, 2017, down from $4.2 billion in October 2014.

Editing by Bernadette Baum

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