Pimco Funds FAQs for Investors
Pimco Funds: What Investors Need To Know
- What is the status of various Pimco closed-end funds?
-
Investors of certain diversified and non-diversified closed-end investment funds managed by Pacific Investment Management Company (PIMCO) have seen the value of their funds fall dramatically over the past several months. Some of these funds are down by more than 50%. Those funds include: the Pimco High Income Fund, Pimco Corporate Opportunity Fund, Pimco Floating Rate Strategy Fund, Pimco Global Stocksplus Income Fund, and the Pimco California Municipal Income Fund II, among others.
Several of the issues facing these funds stem to the February 2008 collapse of the auction-rate securities market, which all but eliminated a major source of financing, as well as left holders of preferred auction bonds with an illiquid investment they have been unable to sell or sold at a significant loss.
In the months following the auction market's collapse, falling debt prices served to increase the costs of borrowing and further pushed down already-battered asset values of Pimco funds.
It also has been revealed that Pimco was overexposed to credit default swaps with Lehman Brothers and American Insurance Corporation (AIG). According to information from Bloomberg, Pimco sold credit default swaps that guarantee $760 million of debt issued by AIG. Should AIG, which continues to have financial troubles despite two bailouts from the federal government, ultimately go bankrupt, Pimco will be forced to fulfill its financial obligations on those swaps.
In terms of credit-default protection on Lehman Brothers, which filed bankruptcy on Sept. 15, sellers will have to pay 91.375 cents on the dollar to settle their contracts. It will be the biggest payout yet in the $55 trillion credit default swap market. Pimco's Total Return Fund, with some $130 billion under management, has written protection on a face amount of $105.4 million of Lehman debt as of June 30, according to regulatory filings.
- My broker recommended the Pimco High Income Fund to me. Now, I am told this fund is suspending dividend payments to shareholders. I am retired and live on a fixed income. I rely on my dividends to help pay my expenses. What can I do?
-
Assets in the Pimco High Income Fund in particular have experienced extensive losses this year. Between Sept. 10, 2008, and Nov. 26, 2008, the fund's share value fell from $11.49 to $3.92.
A number of brokerages, including Citigroup, UBS, Merrill Lynch and others, recommended the Pimco High Income Fund to investors. And, according to complaints, investors were unaware of the risks involved with this fund. Like you, many of them are retirees or nearing retirement age. The dividends they receive from their investments play a critical role in helping them meet day-to-day expenses.
Moreover, many investors who put their money into the Pimco funds did so because they thought they were a safe place to grow their savings. Unbeknownst to them, however, the funds' management increased the percentage of assets to risky and toxic mortgage-backed securities.
Currently, we are investigating the sales practices of various brokerages that sold the Pimco High Income Fund, as well as other Pimco funds to investors. If you were unaware of the risks associated with Pimco funds, contact us today. It also is possible that your losses may be recoverable through a securities arbitration filing with the Financial Industry Regulatory Authority (FINRA). Please contact an attorney for further details about the eligibility of your potential claim.
- Can you provide additional details on various Pimco regarding the suspension of dividends?
-
On Nov. 3, 2008, Pimco was forced to suspend a November dividend payment to Pimco High Income Fund shareholders because the value of the securities held in the fund had fallen below the required 200% asset-coverage ratio. A December dividend payout was suspended, as well.
One week later, Pimco announced that the Pimco High Income Fund, along with the Pimco Floating Rate Income Fund and the Pimco Floating Strategy Fund would each redeem, at par, a portion of their auction-rate preferred shares (ARPS) beginning Dec. 8, 2008, and concluding on Dec. 12, 2008.
Finally, on Nov. 26, the Pimco California Municipal Income Fund II released a statement that it may be forced to delay the payment of its November dividend, as well as the declaration of its next scheduled dividend. As in the case of other Pimco funds, the asset coverage ratio of the California Municipal Income Fund II had fallen below the mandatory 200-percent level.
- Is there a minimum amount to file a FINRA arbitration claim against Pimco?
-
No. In the past, we have pursued investor claims ranging from $10,000 to more than $1 million.
- Does it matter how I purchased my shares in a Pimco fund?
-
If you purchased a Pimco investment through a stockbroker or brokerage firm, they owe investors a fiduciary duty. If your stockbroker recommended the fund, did they disclose and explain the potential risks? Once we review your individual situation, we can provide a more accurate assessment of the viability of your case.
- How is the share price of a closed-end fund like the Pimco High Income Fund determined?
-
The share price is based in part on the value of the investments held in the fund's portfolio, as well as the premium (or discount) placed on it by the market. The total value of all of the fund's securities divided by the number of shares in the fund is defined as the “net asset value,” or NAV. When a fund's share price is higher than NAV, it is selling at a premium; when it is lower, it is selling at a discount to the NAV.
In recent months, many closed-end funds, including Pimco funds, are selling at huge discounts. According to Lipper, Inc., the average discount is 16% to the net asset values of their holdings, which is nearly double the 12-month average.
- I have a good relationship with my stockbroker, and don't want to cause trouble. At the same time, I want to recover my losses in my Pimco investment. Is there a way to do both?
-
Yes. We do not name stockbrokers in FINRA arbitration claims based on the recommendation of a Pimco fund.
It is a reasonable assumption that the information and recommendations a broker provides his or her clients will be accurate and true. At Wall Street brokerages, individual brokers do not research your funds; rather, they are told how to sell funds like Pimco funds by their management.
- Does it cost me any money to file a lawsuit?
-
First and foremost, our team of lawyers will work with you to review your situation. You are not responsible for any fees or expenses unless a recovery is obtained. To review your case, call us at 866-827-6537.
- Where can I find articles or additional information about Pimco-related funds?
-
The Web site, www.subprimelosses.com, offers a comprehensive library of articles and information on Pimco funds, as well as information on other investment-related issues.
Top
