PDO - PDO: Leverage Is Now On Your Side
2024-06-02 07:29:18 ET
Summary
- PIMCO Dynamic Income Opportunities Fund has shown significant improvement in performance in 2024, outperforming other PIMCO taxable CEFs.
- PDO's high leverage has become a tailwind, enhancing returns as the yield curve starts to uninvert.
- PDO's holdings in non-agency mortgage-backed securities and high yield categories have contributed to its outperformance compared to index ETFs.
Most Improved PIMCO Fund of 2024
When I last wrote about the PIMCO Dynamic Income Opportunities Fund ( PDO ) in January, history showed that it was the worst performing closed end fund in the PIMCO taxable family since its inception in 2021. The fund had a headwind from the start, as the Fed began raising short-term rates to fight inflation in March of that year. This increased the fund's cost of leverage. Thanks to the leverage ratio around 40%, which is one of the more levered funds in the suite, PDO had a tough first three years of existence. In the last article, I wrote that I expected PDO to " go from bad to mediocre " in a soft-landing scenario where interest rates moderate while the economy avoids a recession....
PDO: Leverage Is Now On Your Side