Many investors are looking for steady income to help them meet their retirement needs. In today's uncertain, low yield environment, however, flexibility and a broad, global opportunity set are key to meeting that objective.

Lower expected returns make flexibility more important than ever


Forward-looking returns for passive core bonds are closely correlated with current yield levels. Faced with today's historically low yields, income investors may be tempted to focus on the highest yielding segments of the bond market – a strategy that could put hard earned savings at risk.

Tapping into a broad opportunity set can enhance income potential


With lower expected returns going forward, the ability to access a broadly diversified opportunity set, rather than focusing on the highest yielding segments of the market can enhance return potential while also helping to diversify risk. As this chart shows, the global bond market (at right) is much broader than the Bloomberg Barclays U.S. Aggregate Bond Index, the proxy for the core bond universe, many investors look to for income.

Pinpointing the most attractive sources of income across a broad range of sectors


Actively managed multi-sector income strategies seek to capture diverse sources of income by identifying opportunities that generate attractive income potential while diversifying exposures across sectors. As the chart demonstrates, many different bond sectors offer higher yields than U.S. Treasuries in exchange for varying degrees of additional risk – the key is to invest with a manager that has the flexibility and know-how to pinpoint the most attractive sources of income across the broadest possible opportunity set.

Access to a variety of sectors is key in rising rate environments


The Federal Reserve has resumed its hiking cycle. While we expect increases to the fed funds rate to be gradual, rate hikes can pose challenges to some areas of the bond market. Multi-sector income strategies with the ability to access different parts of the global bond market can lower interest rate sensitivity while taking advantage of opportunities in this environment.

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All investments contain risk and may lose value. Investing in the bond market is subject to risks, including market, interest rate, issuer, credit, inflation risk, and liquidity risk. The value of most bonds and bond strategies are impacted by changes in interest rates. Bonds and bond strategies with longer durations tend to be more sensitive and volatile than those with shorter durations; bond prices generally fall as interest rates rise, and the current low interest rate environment increases this risk. Current reductions in bond counterparty capacity may contribute to decreased market liquidity and increased price volatility. Bond investments may be worth more or less than the original cost when redeemed. High yield, lower-rated securities involve greater risk than higher-rated securities; portfolios that invest in them may be subject to greater levels of credit and liquidity risk than portfolios that do not. Floating rate loans are not traded on an exchange and are subject to significant credit, valuation and liquidity risk. Investing in foreign-denominated and/or -domiciled securities may involve heightened risk due to currency fluctuations, and economic and political risks, which may be enhanced in emerging markets . Management risk is the risk that the investment techniques and risk analyses applied by the investment manager will not produce the desired results, and that certain policies or developments may affect the investment techniques available to investment manager in connection with managing the strategy. There is no guarantee that these investment strategies will work under all market conditions or are suitable for all investors and each investor should evaluate their ability to invest long-term, especially during periods of downturn in the market. Investors should consult their investment professional prior to making an investment decision.

This material contains the opinions of the manager and such opinions are subject to change without notice. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. PIMCO is a trademark of Allianz Asset Management of America L.P. in the United States and throughout the world. ©2017, PIMCO.