Income+ portfolios use PIMCO’s best-in-class active funds as building blocks. While we continue to advocate passive strategies built using ETFs for most of our growth oriented portfolios, we believe active funds are better suited to solve the core income needs of clients.
Active funds have the following advantages compared to ETFs when investing for income, making them our vehicle of choice for our Income+ portfolios.
Income+ uses PIMCO funds that are actively managed and are able to utilise a broad range of fixed income securities that seek to produce an attractive level of income while maintaining a relatively low risk profile.
Most ETFs, on the other hand, are managed passively and are limited in their ability to cater to the specific income needs of investors as well as adapt to different market situations.
Given dividends form the major chunk of returns for income investors, any tax implications on it may have a significant impact on the overall returns. The funds used in the Income+ portfolios are domiciled in Ireland making them more efficient with respect to dividend withholding taxes.
Compared to US domiciled ETFs, using Irish-domiciled funds can help Singapore-based investors save as much as 30% of dividend withholding taxes.
Income+ portfolios invest into SGD-hedged share classes of the constituent funds to mitigate currency risks. This is especially important for investors looking for a stable, consistent monthly dividend profile. Unhedged USD denominated ETFs may result in volatile SGD dividend payouts and cause disruptions in the ongoing income needs of clients.
For more details, please refer to the Income+ portfolios’ Investment Strategy.