Latest news with #Pimco
Business Times
a day ago
- Automotive
- Business Times
Harley Davidson nears financing unit deal with Pimco, KKR
[NEW YORK] Harley-Davidson is in advanced talks to sell a stake in its financing unit as well as its existing motorcycle loan portfolio in a deal worth US$5 billion to Pacific Investment Management Company (Pimco) and KKR, according to sources with knowledge of the matter. The firms' private credit arms are in discussions to purchase an interest in the bike maker's Harley-Davidson Financial Services, or HDFS, the sources said. HDFS, which was put up for sale earlier this year, helps the company's dealers finance their inventory and lends to consumers for the purchase of Harley-Davidson and LiveWire motorcycles. The US$5 billion price tag would include the iconic bike maker's existing book of motorcycle loans, the sources said, adding that Pimco and KKR are also seeking to purchase the debt the firm originates in the future. A deal could be announced within weeks, they added. Conversations are ongoing and details and size of the deal may change. Spokespeople for Pimco and KKR declined to comment, while a representative for Harley-Davidson did not respond to requests for comment. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up The potential sale comes as Harley-Davidson grapples with lacklustre sales growth and stiff competition from rivals, including Honda Motor and BMW. The motorcycle maker is set to report results on Jul 30. Its shares are down around 22 per cent year-to-date. Harley Davidson's chief executive officer Jochen Zeitz said in May that 'the HDFS transaction is continuing to progress with multiple interested parties'. The company said earlier this year that it has retained an executive search firm to find a replacement for Zeitz, who intends to retire. Private credit firms have been growing their footprint in the US$5.2 trillion asset based market, which encompasses everything from auto loans to residential mortgages and can often receive investment-grade ratings. Some of them have been buying up stakes in the companies that originate those consumer loans while also purchasing the debt they originate. For instance, Carlyle Group has done so in the past by acquiring minority stakes in firms such as Sungage Financial, which provides financing for residential solar cells. Often times, these firms may look to repackage those loans into securities of varying risk and size. Harley-Davidson is no stranger to that asset-backed bond market, having previously repackaged its motorcycle loans into notes, according to data compiled by Bloomberg. BLOOMBERG
Bloomberg
a day ago
- Business
- Bloomberg
Pimco's Forgash: High-Yield Market at Highest Quality in Years
David Forgash, managing director and portfolio manager at Pimco, says corporate earnings have been very good which is causing bond spreads to narrow on "Bloomberg The Close." (Source: Bloomberg)
Yahoo
a day ago
- Business
- Yahoo
Pimco's Forgash: High-Yield Market at Highest Quality in Years
David Forgash, managing director and portfolio manager at Pimco, says corporate earnings have been very good which is causing bond spreads to narrow on "Bloomberg The Close."
Business Times
2 days ago
- Business
- Business Times
How reliable is the 60/40 portfolio in downturns? Adding private debt not a panacea
[SINGAPORE] A big argument in favour of an investment in private markets is that the traditional 60/40 balanced portfolio (60 per cent stocks, 40 per cent bonds) is no longer as reliable or robust as it traditionally was. The steep portfolio loss in 2022 when stocks and bonds fell at the same time – and each asset class by double digits – has likely scarred most investors. It is no coincidence that since that year, strategists and bankers have redoubled efforts to persuade investors to invest in assets that are less correlated with public markets. Institutions and private wealth advisers alike are pinning their hopes on private markets to drive not just overall portfolio returns but also dampen risk. BlackRock chairman Larry Fink in his 2025 letter wrote that the future standard portfolio may have the allocation of 50/30/20 – that is, 50 per cent stocks, 30 per cent bonds and 20 per cent in private assets such as infrastructure, real estate and private credit. 'Generations of investors have done well following (the 60/40) approach, owning a mix of the entire market rather than individual securities. But as the global financial system continues to evolve, the classic 60/40 portfolio may no longer fully represent true diversification,' he wrote. The big question dogging the 60/40 method is not so much that of the risk and return of equities, but rather of bonds. Have bonds lost their ability to diversify? It is significant that the three types of private assets Fink cites are those that come closest to bonds. Infrastructure, real estate and private credit all generate a yield. Private assets also show lower correlation with public markets. Retail investors are able to access listed infrastructure and real estate investment trusts. Private debt is currently confined to accredited investors. And, in today's environment, there may be reasons for caution in private debt, which I will touch on shortly. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Strategists are not calling for the scrapping of the 60/40 portfolio, but to enhance its diversification benefits. Still, some fund managers maintain that the 60/40 approach continues to prove its value even without private markets, and the 2022 experience was an outlier. Morningstar noted that 2022 was the single year over a 150-year period that bonds failed to provide diversification benefit in a downturn. Could it happen again? 60/40 portfolio's track record Erin Browne, Pimco managing director and portfolio manager, said that the 60/40 portfolio has proven its resiliency – not just over the past decade but over more than 30 years. Browne, based in Pimco's Newport Beach office, looks after the firm's multi-asset strategies. Pimco manages more than US$2 trillion in assets. 'Our portfolio is up by around 10 per cent year to date, and the (reference) 60/40 is up by 8 per cent. It really has proven to be a good core ballast of delivering portfolio returns over different market environments and histories. This year is no different,' she said. Pimco's data shows that since 1990, a global 60/40 portfolio has returned just 0.7 per cent less than global stocks on an annualised basis, but with 37 per cent less volatility. 'The US stock-bond correlation has gotten more negative over recent months, with the one-year correlation dropping from 0 to minus 15 per cent. This is particularly valuable in an uncertain macro environment; both stocks and bonds can benefit from a soft landing amid central bank rate cuts,' she added. 'If growth deteriorates faster than expected, high-quality bonds provide a ballast. Finally, the long-term track record and easy-to-understand benefits of a 60/40 allocation allows investors to stay invested rather than attempt to time the market, which typically causes underperformance.' Browne said inflows into Pimco's multi-asset offerings are not just from retirement savers, but also more broadly from investors looking to build a 'strong, stable bellwether' as their core portfolio. 'Flows are really coming from investors looking to create the core of their asset allocation strategy, where they're able to participate in continued upside in equities, and also have some diversification.' She believes volatility is likely to be elevated given the geopolitical and macroeconomic shifts, from a 'unique unipolar world' to a multi-polar world, and from global cooperation to fragmentation. 'There will be friction in that change… Growth is also slowing on a global basis, and that creates pockets for disruption within global markets and equities, which creates more volatility.' Morningstar research found that the poor performance of the 60/40 portfolio in 2022 was due to a painful bear market in bonds that actually began around 2020. In its analysis of how the 60/40 portfolio performed over 150 years, it found that the crash of the 2020s was the only one where the decline of the 60/40 portfolio was more painful than that of an all-stock portfolio. That is, while the deepest drawdown of the 60/40 portfolio was shallower than the all-equity portfolio, it has taken the 60/40 portfolio longer to recover. In the 2020s, the downturn in equities – brought on by the Ukraine war, higher inflation and supply shortages – coincided with a bear market in bonds. 'While the stock market recovered to its previous high in September 2024, the bond market has not yet fully emerged from underwater. This decline was so severe that it prevented the 60/40 portfolio from returning to its previous high until June 2025 – marking the only time in the past 150 years that the 60/40 portfolio experienced more pain than the stock market,' it said. 'Nonetheless, even in this once-in-150-years bond bear market, the depth of the decline experienced by a 60/40 portfolio was less than that of either the stock market or the bond market alone.' Pimco's Browne argued that the starting point of bond yields is key for an investor. 'I don't think fixed income as a risk diversifier is dead. There's real potential for fixed income to continue to deliver not only on income return but also diversification,' she noted. 'In 2020 inflation ran very high, and the starting points of yields were exceptionally low in a negative or zero-rate environment. But where we are today is quite different. The starting point of yields today provides a really nice cushion to protect portfolios in risk-off events, with 10-year yields exceeding 4 per cent. Yields tend to be very highly correlated with the expected return of the asset over the next five years.' Caution on private credit What about private credit as a bond proxy? Despite an attractive yield, it is not a panacea for returns or lower risk. There is also reason for caution when almost every private banker or sales person trots out private debt offerings. According to an article in the Financial Times, the GIC itself is cautious as the asset class is untested in a major credit default cycle. GIC chief investment officer Bryan Yeo reportedly said the investment company is 'raising the bar in terms of further deployment in the private credit space', adding: 'We're now at a part of the cycle where we feel that spreads are a lot tighter, and valuations are also higher.' Pimco is wary as well. It noted in its mid-year report that credit spreads remained tight relative to historic averages despite signs of 'elevated secular recession potential', which reflects some complacency in public and private credit markets. Private credit, it said, is vulnerable to broad risk asset repricing due to its 'large allocations' into technology and artificial intelligence disruptors. 'Amid limited fiscal space, a genuine credit default cycle – unlike the recent 'buy the dip' era – may unfold for the first time in years, catching many investors unprepared… We express caution in areas of private corporate credit where capital formation has outpaced investable opportunities, leading to potential disappointment.'
Wall Street Journal
17-07-2025
- Business
- Wall Street Journal
Bond Giant Pimco Dismisses Trump's Threats to Fed's Powell
Big investors are betting that President Trump won't follow through on his threat to fire Federal Reserve Chairman Jerome Powell. Bond powerhouse Pimco hasn't adjusted its positions in light of Trump's threats to push Powell out, even with the potential for dramatic moves in Treasurys if it were to happen, according to people close to the situation.
