product focus pathfinder global final

7/27/2019 Product Focus Pathfinder Global FINAL

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Product Focus:

PIMCO Pathfnder Strategy

Anne Gudefn and Charles Lahr Discuss

PIMCOs Global Deep Value Equity StrategyPIMCO recently introduced the PIMCO Pathnder Strategy, an actively managed global

deep value equity approach focused on steeply discounted stocks of fundamentally

strong companies. In the interview below, portfolio managers Anne Guden and Charles

Lahr discuss the global deep value investment process, supplemental strategies they

may use in their effort to enhance results, their risk management style, and how equity

investing integrates with PIMCOs established process and platform.

Q: What is the PIMCO Pathfnder Strategy?

Gudefn:PIMCO Pathnder Strategy is a global deep value equity approach which

focuses on stocks trading at signicant discounts to their intrinsic value as an

illustration, were looking for securities trading for 60 cents that we believe are actually

worth a dollar. Our fundamental bottom-up analysis looks for these mispriced securities

and seeks to outperform the broad global equity markets over the long term, and do so

with lower volatility.

PIMCO Pathnder Strategy is an actively managed go anywhere global strategy: we

look for undervalued companies around the world, without benchmark constraints,

targeting attractive returns across full market cycles. We may also make tacticalinvestments in distressed debt, merger arbitrage and other opportunistic situations.

Guarding against downside risk is a key objective of the strategy. Together, Charles and

I have 36 years of experience investing in deep value equities using this approach.

Q: Can you tell us a bit more about PIMCOs deep value equity investment process?

Lahr: Markets can overreact to new information or shorter-term cyclical trends and

punish companies that have solid fundamentals and long-term potential. Perhaps

there has been a disappointing earnings report, a restructuring or a lawsuit. Our task

as deep value investors is to evaluate all factors of the business, estimate the gains it

can reasonably be expected to deliver over time, and compare the market price of that

company with our assessment of the intrinsic value of the business. To achieve this depth

of understanding, we visit companies worldwide so that we can engage face-to-face

with senior management and get a rsthand view of operations.

We invest where we see a wide discount between the price in the market and our

estimate of intrinsic value. This deep discount provides the opportunity for capital

appreciation; yet, it also provides us with a margin of safety which can help insulate the

portfolio in equity market downturns. We typically endeavor to buy a security at a large

discount (for example, 60% or 70% of intrinsic value) and sell when its price approaches

Anne Guden, CFA

Executive Vice

President

Portfolio Manager

Charles Lahr, CFA

Executive Vice

President

Portfolio Manager


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Product Focus: PIMCO Pathfnder Strategy

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what we have determined to be its intrinsic value. We are generally long-term investors and our typical holding period

is three to ve years.

To nd attractive companies we study annual reports and company lings, sift through information on corporate

actions, investigate restructurings, spin-offs, mergers and acquisitions, and speak with industry contacts. To

determine intrinsic value, we analyze the companys fundamentals its capital structure, its competitive positioning,

industry trends, and the global economic environment and determine its intrinsic value based upon either an

asset-based valuation or its free cash ow generation. Ideal companies are likely to have solid earnings power,

sustainable business models, competitive advantages, the exibility to restructure inefciencies, and shareholder-

friendly management.

In addition, desirable securities often have identiable triggers which may help us unlock underlying value.

Understanding the equity as a business thinking like an owner is critical to the deep value approach. We also

strive to stay in touch with top-level management to advise them about shareholder value creation and to pursue the

activation of those triggers to unlock hidden value.

Our capabilities in bottom-up security selection mesh well with and are enhanced by PIMCOs proven credit research

resources and analytical processes.

Q: How is the PIMCO Pathfnder Strategy dierent rom other deep value equity strategies?

Gudefn: PIMCO Pathnder Strategy is unique in the extent to which it seeks capital appreciation while emphasizing

downside mitigation. The defensive orientation of the strategy seeks to provide outperformance across full market

cycles and it may demonstrate especially strong relative performance during poor equity market environments. As

a result, the PIMCO Pathnder Strategy may offer a more attractive risk/return prole over the long term than othervalue-oriented strategies and the passive broad global equity market index.

Another difference is the strategy can opportunistically invest in merger arbitrage, distressed debt and other

tactical situations.

The merger arbitrage element of the strategy seeks equity-like returns with less volatility and relatively low

correlation to the overall market by capturing the spread between the current price of the target company and

the ultimate takeover price upon acquisition. Our dedicated team has broad expertise and focus on announced

deals; a less risky way to invest in merger arbitrage. The PIMCO Pathnder Strategy also does not use leverage

in these investments.

In distressed debt investing, we seek to purchase bonds and bank debt at notable discounts to par with meaningfulcollateral backing. Our distressed debt specialists along with our team of global credit analysts, focus on rms in

distressed situations (bankruptcies, reorganizations, coercive tenders) and on seniority in the capital structure. If and

when a distressed company regains health, the debt we purchased at a discount may appreciate towards par value

or even be swapped into equities.

When appropriate, PIMCO Pathnder Strategy can also include other select tactical opportunities currency

hedging, for example that benet from PIMCOs depth and expertise.


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Q: You mentioned PIMCO Pathfnder Strategy is a go anywhere strategy what are some advantages o this global

approach, and how do you target consistent value across all economic environments?Lahr: The strategys global reach allows us to pursue the best deep value opportunities anywhere they may be found

and to diversify among regions, sectors and capital structures, helping us target attractive returns in most market

environments. This can be an especially compelling strategy in an environment of shifting growth and wealth drivers,

heightened market volatility and global economic rebalancing. Such economic dynamics can obscure underlying

security value, presenting additional opportunities for the strategy.

The PIMCO Pathnder Strategy aims to provide consistent added value across full market cycles. Our active

management style encourages both strategic and tactical decision making, potentially limiting downside risk while

capturing positive market movements.

While PIMCO Pathnder Strategy is benchmarked to the MSCI World Index, our investment process is notconstrained by any adherence to benchmark characteristics or holdings, nor do we strive to limit tracking error.

The strategy gives us the exibility to manage risk and seek returns in any environment.

Q: PIMCO is known primarily as a fxed income investment manager why is PIMCO introducing a deep value

equity strategy?

Gudefn: Equity investing along with commodities, real estate, currencies, alternatives and multi-asset offerings

has been a part of PIMCOs platform for many years. The rm was a pioneer in portable alpha equity investing

which does not involve traditional active stock selection. For example, PIMCO introduced the StocksPLUS equity

derivatives-based strategies in 1986.

The rms success since its founding in 1971 has been grounded in its disciplined investment process, whichcombines expertise in economic forecasting and risk management with extensive resources and understanding

of security selection. This investment process naturally produces thought leadership and strategies applicable to

economies and the entire capital structure of individual companies.

Deep value equity investing at PIMCO now allows us to access another part of the capital structure of a rm its

equity and is another investment tool to complement our thinking in xed income, asset allocation and other

strategies. Simply put, the PIMCO Pathnder Strategy is enhanced by inputs from PIMCOs extensive global resources

and expertise.

Q: How does PIMCOs investment style and process apply to a deep value equity approach?

Lahr: The strategys deep value equity approach focuses on bottom-up fundamental security analysis and stock

selection. The rms economic views help inform the security valuation process. PIMCOs experience and investment

process provide a framework for evaluating the best opportunities among the full spectrum of economies, industries,

rms and individual securities around the world.

Also, PIMCOs proven credit research capabilities, market risk hedging strategies and experience in distressed debt

enhance our deep value bottom-up process. We also tap into the other benets of the PIMCO platform, including

extensive resources in cash and currency management, highly evolved proprietary analytical tools, policy research,


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Product Focus: PIMCO Pathfnder Strategy

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derivatives management and operational execution. PIMCOs size and reach in the marketplace may also offer unique

trading opportunities and access to top-level company management.

The strengths of PIMCOs proven credit and global economic research, and its knowledge-based investment platform,

helps us focus our efforts on uncovering the best deep value opportunities and producing attractive risk-managed

returns for investors.

Q: How do you evaluate and manage risk in the strategy?

Gudefn: The strategys risk management philosophy can focus on mitigation of downside potential in all market

environments. Sources of risk in a deep value equity strategy can include overestimating intrinsic value, excessive

leverage, awed business models and inadequate company management. Our risk management techniques include

thorough fundamental research, a disciplined buy-sell strategy focused on signicant discount targets, and selective

tactical hedging of currency and other risks via derivatives and other instruments.

Downside risks exist in every market environment, and we are continually mindful of the equity market risk embedded

in the strategys equity-oriented portfolio. We may also use market risk hedging when appropriate.

In addition to a rigorous risk management discipline, we also have access to PIMCOs advanced proprietary analytical

tools to monitor the portfolios risk sensitivities and characteristics. These tools are important in managing active

equity strategies, as their exibility facilitates analysis at the regional, sector and security level.

Q: How will your deep value approach ace the challenges inherent in PIMCOs secular outlook, such as shiting

growth dynamics (subdued growth in the developed markets, higher growth in emerging economies), private sector

deleveraging, diminished corporate profts and increasing regulation?

Lahr: All of those factors are likely to create notable gaps between short-term trends and longer-term structural

realities, which, in turn, may obscure the underlying value of many securities. Also, the recent crisis may have hurt

the prices of fundamentally healthy companies. In this investment atmosphere, we anticipate discovering many

attractively priced opportunities.

We believe the sustained period of slower growth we expect to see over the secular horizon can support effective

deep value equity selection. In particular, the strategys focus on fundamental analysis and mitigation of downside

potential is likely to provide investors with a margin of safety in a sideways or downward trending equity market.

Thank you both or your time.


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Past performance is not a guarantee or a reliable indicator of future results. Equities may decline in value due to both real and perceived generalmarket, economic, and industry conditions. Investments in value securities involve the risk the markets value assessment may differ from the managerand the performance of the securities may decline. Investing in securities of smaller companies tends to be more volatile and less liquid than securitiesof larger companies. Investing in distressed companies (both debt and equity) is speculative and may be subject to greater levels of credit, issuerand liquidity risks, and the repayment of default obligations contains signicant uncertainties; such companies may be engaged in restructuringsor bankruptcy proceedings. Investing in foreign denominated and/or domiciled securities may involve heightened risk due to currency uctuations,and economic and political risks, which may be enhanced in emerging markets. Investments in companies engaged in mergers, reorganizations orliquidations may involve special risks as pending deals may not be completed on time or on favorable terms. High-yield, lower-rated, securities involvegreater risk than higher-rated securities; portfolios that invest in them may be subject to greater levels of credit and liquidity risk than portfolios thatdo not. Derivatives may involve certain costs and risks such as liquidity, interest rate, market, credit, management and the risk that a position could notbe closed when most advantageous. Investing in derivatives could lose more than the amount invested. Diversication does not ensure against loss.

Margin of safety is the difference between the intrinsic value of a stock and its market price.

The MSCI World Index is a free oat-adjusted market capitalization weighted index that is designed to measure the equity market performance ofdeveloped markets. Since June 2007 the MSCI World Index consisted of the following 23 developed market country indices: Australia, Austria, Belgium,Canada, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain,Sweden, Switzerland, the United Kingdom, and the United States. The index represents the unhedged performance of the constituent stocks, in USdollars. It is not possible to invest directly in an unmanaged index.

Registered trademarks or trademarks contained herein are the property of Pacic Investment Management Company LLC and/or Allianz Global Investorsof America L.P. in the United States and/or other countries.

This material contains the current opinions of the manager and such opinions are subject to change without notice. This material has been distributedfor informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy orinvestment product.

About the Portolio Managers

Anne Gudefn, CFA, is an executive vice president in the London ofce and a global equity portfolio manager. Prior tojoining PIMCO in January 2010, she was a senior vice president, portfolio manager and research analyst at the Mutual

Series Group of Franklin Templeton Investments; she served as a co-portfolio manager for the Franklin Mutual Global

Discovery Fund from 2005 to 2009 and as portfolio manager for the Franklin Mutual Quest Fund from 2003 to 2009. In

total, Ms. Guden helped oversee more than $25 billion in investment assets. Earlier in her career, she was a research

analyst covering European equities at Perry Capital. In July 2009, Ms. Guden was named as one of The Worlds

Greatest Investors by SmartMoney Magazine. She has 20 years of investment and nancial services experience and

holds a bachelors degree from IEP Paris and an MBA from Columbia Business School.

Charles Lahr, CFA, is an executive vice president in the New York ofce and a global equity portfolio manager. Prior

to joining PIMCO in December 2009, he was a portfolio manager at the Mutual Series Group of Franklin Templeton

Investments; he served as a co-portfolio manager for the Franklin Mutual Global Discovery Fund from 2007 to 2009,an analyst for Franklin Mutual Advisors LLC (Mutual Series) and portfolio manager for the Franklin Mutual Financial

Services Fund from 2004 to 2009. In total, Mr. Lahr helped oversee more than $20 billion in investment assets. Earlier in

his career, he was an international equities research analyst with the State of Wisconsin Investment Board, as well

as a member of the fund management team for the Mutual European and Mutual Beacon Funds. He has 16 years of

investment and nancial services experience and holds an MBA and a bachelors degree in business administration

from the University of Iowa.


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Newport BeachPacic Investment Management Company LLC840 Newport Center DriveNewport Beach, CA 92660USA800-927-4648

949-720-6000

AmsterdamPIMCO Europe Ltd Amsterdam Branch1

(Registered in The Netherlands,

Company No. 24319743)

Registered Ofce

Schiphol Boulevard 315

Tower A6

1118 BJ Luchthaven Schiphol

The Netherlands

+31 (0) 20 655 4710

Hong KongPIMCO Asia Limited2

24th FloorUnits 2403 & 2405Nine Queens Road CentralHong Kong+852 3650 7700

LondonPIMCO Europe Ltd1

(Registered in England and Wales,Company No. 2604517)Registered OfceNations House103 Wigmore StreetLondon W1U 1QSEngland+44 (0) 20 7872 1300

MunichPIMCO Europe Ltd Munich Branch1

(Registered in Germany, Company No. 157591)Registered OfceSeidlstrae 24-24a80335 Munich

Germany+49 (0) 89 1221 90

New YorkPacic Investment Management Company LLC1345 Avenue of the AmericasNew York, NY 10105-4800USA212-739-3000

SingaporePIMCO Asia Pte Ltd3

501 Orchard Road #08-03Wheelock PlaceSingapore 238880

+65 6491 8000Registration No. 199804652K

SydneyPIMCO Australia Pty Ltd4

ABN: 54 084 280 508AFSL: 246862Level 19, 363 George StreetSydney, New South Wales 2000Australia+61 2 9279 1771

TokyoPIMCO Japan Ltd5

Toranomon Towers Ofce 18F4-1-28, Toranomon, Minato-ku,Tokyo, Japan 105-0001+81 3 5777 8150

TorontoPIMCO Canada Corp.6

120 Adelaide Street WestSuite 1901Toronto, Ontario, Canada M5H 1T1416-368-3350

ZurichPIMCO (Switzerland) LLC(Registered in Switzerland,Company No. CH-020.4.038.582-2)Dreikoenigstrasse 31a8002 ZurichSwitzerland

+41 (0) 44 208 3867

PIMCO provides services only to qualied institutions and investors.

1 PIMCO Europe Ltd, PIMCO Europe Ltd Munich Branch, and PIMCO Europe Ltd Amsterdam Branch are authorized and regulated by the Financial

Services Authority in the UK, 25 The North Colonnade, Canary Wharf, London E14 5HS. PIMCO Europe Ltd Munich Branch is additionally regulated by

the BaFin in Germany in accordance with Section 53b of the German Banking Act and PIMCO Europe Ltd in Amsterdam is additionally regulated by the

AFM in the Netherlands.

The services and products provided by PIMCO Europe Ltd are available only to professional clients as dened in the Financial Services Authoritys

Handbook. They are not available to individual investors, who should not rely on this communication.

2 PIMCO Asia Limited is licensed pursuant to the Securities and Futures Ordinance in Hong Kong.

3 PIMCO Asia Pte Ltd is regulated by the Monetary Authority of Singapore.

4 PIMCO Australia Pty Ltd, AFSL 246862 and ABN 54084280508, offers services to wholesale clients as dened in the Corporations Act 2001.

5 PIMCO Japan Ltds Financial Instruments Business Registration Number is Director of Kanto Local Finance Bureau (Financial Instruments Firm) No.382.

PIMCO Japan Ltd is a member of Japan Securities Investment Advisers Association and Investment Trusts Association.

Investment management products and services offered by PIMCO Japan Ltd are offered only to persons within i ts respective jurisdiction, and are not

available to persons where provision of such products or services is unauthorized.

The value of assets uctuate based upon prices of securities in the portfolio, market conditions, interest rates, and credit risk, among others.

Investments in foreign currency denominated assets will be affected by foreign exchange rates. All prots and losses incur to the investor. There is no

guarantee that the principal amount of the investment will be preserved, or that a certain return will be realized; the investment could suffer a loss. The

fee charged will vary depending on the investment trust acquired or the investment advisory agreement entered into; these materials do not set forth

specic fee amounts or their calculation methodologies.

6 PIMCO Canada Corp provides services only to accredited investors within certain provinces or territories in accordance with applicable law.

No part of this publication may be reproduced in any form, or referred to in any other publication, without express written permission. 2010, PIMCO.

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