Losses Continue For Several Pimco Funds
A November 2008 posting on a Yahoo message board may be the best description yet of the Pimco High Income Fund: “A fund soon to be a member of the grateful dead.”
This year has not been kind for investors of Pacific Investment Management Company’s High Income Fund (NYSE: PHK). Between Sept. 10 and Nov. 25, the fund saw its value fall from $11.49 a share to $3.44. On Nov. 3, Pimco’s parent company, Germany-based Allianz SE, announced that the Pimco High Income Fund would suspend a November payment of dividends to common shareholders, as well as a scheduled payment in December, because the value of securities in the fund had fallen below the required 200% asset-coverage ratio.
On Nov. 19, an announcement was issued that three Pimco funds - the Pimco High Income Fund, 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.
A number of investors who purchased these closed-end funds are retirees. They relied on the dividends from their investments to pay daily living expenses. Some investors are now coming forth with claims that they were unaware of the risks associated with the funds and, as a result, have suffered significant financial losses.
Several other Pimco-managed funds, including the PIMCO Corporate Opportunity Fund, PIMCO Corporate Opportunity Fund, PIMCO Floating Rate Income Fund and the PIMCO Municipal Advantage Fund also are experiencing steep losses this year. Now it’s a question of exactly how underwater they may be.
So far, Pimco isn’t saying.
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