In pursuing the Fund's investment objective, PIMCO applies a wide range of diverse strategies including Duration analysis, Credit analysis, Relative Value analysis, Sector Allocation and Rotation and individual security selection

To seek to provide focused exposure to attractively priced Capital Securities together with a maximum total return, consistent with the preservation of capital and prudent investment management.

Benefits of investing in the PIMCO Capital Securities Fund - Wholesale Class

Significant features and benefits of investing in the Fund are:

Investment Process

• Supported by a deep global presence, the Fund benefits from PIMCO's thought leadership and time-tested investment process, which guides portfolio construction via a top-down macroeconomic outlook and rigorous bottom-up credit analysis.

Expertise

• PIMCO is one of the largest fixed interest managers in the world with more than 785 investment professionals globally as at 30 June 2019

• Dedicated credit experts offering insights into all major regions and sectors of the global credit market.
• Over 50 credit analysts and 80 credit and mortgage portfolio managers around the globe providing expertise and credit research into numerous credit securities.

Diversification And Active Management

• The Fund will comprise a well-diversified portfolio of Capital Securities sourced from global markets, which can improve risk-adjusted returns.
• The Fund is actively managed, which allows PIMCO to focus on securities regarded by PIMCO to have the strongest risk versus return attributes and avoid securities that are regarded by PIMCO to have insufficient value or a likelihood of capital loss.

Regular distributions

• The Fund seeks to provide a regular income stream by way of quarterly distributions (the RE may change the distribution frequency without notice).

Regular reporting

• Monthly, quarterly and annual reporting is provided to keep you up to date on your investments.

Investor suitability

The Fund is designed for investors who wish to have a broadly diversified exposure to global Capital Securities.

The Fund is designed for investors who wish to have a broadly diversified exposure to global Capital Securities

About the Fund

The Capital Securities Fund is an actively managed global portfolio that primarily invests directly and indirectly (via other funds) in subordinated debt instruments issued by banks, insurance companies, and other specialty finance companies. Most investments will be concentrated in Tier1, Tier 2, and contingent convertible (CoCo') Bonds though the fund maintains flexibility to invest across the capital structure.

The Fund is a global approach to subordinated debt instruments issued by banks, insurance companies and other specialty finance companies. As the global banking sector continues a multi-year process of deleveraging, the market environment remains conducive to the appreciation of these securities.

Why invest in this Fund

Diversifying Australian bank exposure

The global banking industry is undergoing a generational paradigm shift, and the latest developments on Australian banks' capital adequacy requirements from the Australian Prudential Regulation Authority (APRA) are an unequivocal sign this shift has reached Australian shores. Capital securities offers an opportunity for investors to diversify their concentrated Australian bank exposure by harnessing a diversified global opportunity set. 

A compelling opportunity set 

Capital securities issued by global financial companies can be an attractive opportunity relative to both high yield bonds and equities. PIMCO believes the strong fundamentals of the banking system, the influence of regulation, and compelling valuations are supportive of attractive long-term total returns within the sector.

A high conviction portfolio

The Fund is managed on an unconstrained basis. The absence of a typical fixed income benchmark emphasises the exposure to PIMCO's highest conviction ideas within the global financial sector. This highly-focused, "top picks approach allows PIMCO to allocate across the capital structure based on PIMCO's assessment of relative value and avoid undesired exposure to banks which could lose capital value.

How we invest your money

The Fund is an actively managed fixed interest fund that predominantly invests directly and indirectly (via investment in other funds managed by PIMCO or its affiliates, each a "Target Fund) in subordinated debt instruments issued by banks, insurance companies, and other specialty finance companies. Most investments will be concentrated in Tier 1 and Tier 2 capital, and contingent convertible bonds, though the Fund maintains flexibility to invest across the capital structure.

At the date of the PDS, the Fund currently seeks to achieve its investment objective by investing all or part of its assets in one or more of the Target Funds. The Fund may also hold cash and Derivatives. The Derivatives may include futures, forward contracts, options, swap agreements including credit default swaps and mortgage derivatives. Derivatives may be traded on an exchange or over-the-counter (which are not traded on an exchange). In pursuing the Fund's investment objective, PIMCO applies a wide range of diverse strategies including Duration analysis, Credit analysis, Relative Value analysis, Sector Allocation and Rotation and individual security selection. PIMCO's investment strategy emphasises active decision making with a long-term focus and seeks to avoid extreme swings in Duration or maturity with a view to creating a steady stream of returns. A number of these terms are explained in the Glossary section of the Reference Guide.

In pursuing the Fund's investment objective, PIMCO applies a wide range of diverse strategies including Duration analysis, Credit analysis, Relative Value analysis, Sector Allocation and Rotation and individual security selection. PIMCO's investment strategy emphasises active decision making with a long-term focus. A number of these terms are explained in the Glossary section of the Reference Guide.

Investment guidelines

PIMCO has adopted the following guidelines in managing the Fund:

• Duration — The average portfolio Duration of the Fund will vary based on PIMCO's forecast of interest rates and under normal conditions it is expected to range between 3 to 7 years.

• Credit quality — There are no restrictions on the minimum credit rating of fixed income instruments held by the Fund and the Fund may invest without limit in securities rated lower than Investment Grade.  

• Capital Securities — The Fund will invest at least 80% of its assets in Capital Securities.

• Common stock — The Fund may invest up to 10% of net assets in common stock. In the event a convertible security converts into common stock causing the Fund to exceed the limit of 10% of net assets in common stock, PIMCO will use its best efforts to reduce the Fund's investment in common stock below 10% of net assets within a reasonable timeframe and taking into account the best interests of the Fund.

• Currency hedging — PIMCO will normally seek to hedge the Fund's foreign currency exposure between 90% and 110% to Australian dollars.

Percentage limitations will apply at the time of investment. The Fund is not required to sell any securities in the event that such limitations are subsequently exceeded, whether as a result of market movements, applications or withdrawals from the Fund or otherwise.

A number of these terms are explained in the Glossary section of the Reference Guide.

PIMCO will take into account the Fund's direct investments and the Fund's investments in Target Funds in applying the Investment Guidelines.

Asset classes and allocation ranges

• Fixed income and cash: 100%

• Common stock: 0-10%