PIMCO GIS Income Fund: A leading bond fund targeting regular income

What happened?

As T-bill yields decline, many investors are exploring ways to earn higher income on their savings.

Previously, I highlighted how bond funds provide exposure to a diversified portfolio of bonds, benefiting not just from yield but also potential price gains when interest rates fall.

One fund that has caught investors’ attention is the PIMCO GIS Income Fund, one of the largest bond funds globally.

There appears to be more interest in the PIMCO GIS Income Fund after MariBank launched Mari Income Invest with the fund. 

Follow that, I saw several questions in the Beansprout community about whether the PIMCO GIS Income Fund is safe, is the dividend payout sustainable, and what are the risks involved. 

In this post, we take a closer look at the PIMCO GIS Income Fund to see if it could be a worthwhile addition to your portfolio.

What is the PIMCO Income GIS Fund? 

The PIMCO GIS Income Fund is a professionally managed bond fund that aims to provide steady returns and consistent income. 

It invests in a mix of bonds worldwide, with a strong focus on U.S. bonds. 

Since its launch in 2012, the fund has grown to US$90.9 billion in assets under management (as of 31 January 2025), making it one of the biggest in its category.

The goal of the fund is to provide regular income, while also offering potential for long-term growth. 

It achieves this by carefully selecting bonds from different sectors worldwide while ensuring broad diversification to reduce risk.

What you need to know about the PIMCO GIS Income Fund

#1 – Higher yield compared to T-bills

For Singapore investors, the E SGD Hedged Inc share class currently offers an annualized yield of 6.56%, with a fixed monthly payout of SG$0.04547 per share (as of 28 February 2025).

To keep the payouts steady, the fund follows a structured approach where the distribution amount is reviewed periodically to ensure it remains sustainable. 

This was last revised in 2022, when it increased from around 4%.

However, investors should note that the distribution yield does not always match the actual returns from the bonds held by the fund.

As of 31 January 2025, the estimated gross yield-to-maturity (YTM) of the fund is 7.25% in USD terms.

#2 – A well-balanced investment approach

The fund follows a barbell strategy, balancing safer and higher-return bonds:

The conservative half includes U.S. Treasury bonds and Agency mortgage-backed securities (MBS), providing stability.

The higher-return half consists of other types of bonds like corporate bonds, bank loans, high-yield bonds, and bonds from emerging markets.

This strategy helps the fund maintain a high credit rating of AA- (as of 31 January 2025), with the largest allocation currently in U.S. Agency MBS, as PIMCO sees strong opportunities in this segment.

#3 – Active risk management 

One of the fund’s biggest strengths is its ability to adapt quickly to changes in interest rates.

It typically holds bonds with an average maturity of around 5 years, but has recently increased exposure to 10-year bonds and added UK and Australian bonds to diversify further.

The fund’s active management means it can adjust its bond holdings when needed.

As of 31 January 2025, the effective maturity is 6.48 years, and the duration is 4.61 years.

How has the PIMCO Income Fund performed? 

One of the available share classes for Singapore investors, the E SGD Hedged Inc share class, has a total expense ratio (TER) of 1.45% and was launched in February 2013.

As of 31 January 2025, this share class has delivered an annualised total return (before sales charge) of 2.91% p.a. over the past 10 years, well above the benchmark’s 0.73% p.a. 

On a calendar year basis, the share class outperformed the benchmark 7 out of the last 10 years. 

Even in challenging years, the fund shows resilience, managing to deliver positive returns in 2 out of 4 years when the benchmark was negative over the last 10 years.

The large differences of the yearly returns especially observed from the benchmark numbers gives us some indication on how the bond market and the fund may behave in the impending interest rate cuts. 

2022 was the year when US interest rates hiked sharply from 0% to 4%, and the bond market suffered its worst return for the decade. 

In contrast, 2019 to 2020 was the period of the last round of rate cuts, and that resulted in the 2 best years of return for the decade at benchmark level.

Historically, bond markets tend to do better when interest rates fall. With expected rate cuts ahead, this could be a positive factor for bond investors.

What are the risks of the PIMCO Income Fund? 

#1 - Not capital guaranteed

As with all mutual funds, the PIMCO GIS Income Fund is not capital guaranteed. 

The performance data as mentioned above clearly shows the bond markets can be volatile and the fund can deliver negative returns during challenging times.

While active management helps navigate market conditions, investors should be prepared for potential ups and downs in their investment journey.

#2 – Understanding the monthly payouts

When evaluating fund performance, it’s important to look at total return, which includes both net asset value (NAV) changes and distributions, assuming they are reinvested. 

While the fund offers a steady payout, part of the distribution may come from capital rather than bond income. For instance:

In February 2025, 64.84% of the payout came from bond income, while 35.16% came from capital.

In January 2025, 55.20% came from bond income, and 44.80% from capital.

If the fund’s overall return is lower than its payout rate, investors should expect the fund’s value (NAV) to decline over time.

#3 - Higher Fees Compared to Passive Bond Funds

The fund is actively managed, which means investors pay a Total Expense Ratio (TER) of 1.45% per year for the E share class.

The TER includes the management fees and other expenses, though PIMCO does not provide the breakdown like other fund providers. 

Typically, management fees compensate the professional fund managers and their team for their market research, risk management, and active investment decisions aimed at outperforming the benchmark.

Some distributors may also take a cut from these fees as trailer fees. However, investors can reduce costs by choosing platforms that offer rebates, or offer share classes which offer share classes with lower total expense ratios. 

It’s also important to note that the performance reported by the fund is already net of TER, meaning expenses have been deducted from the returns shown.

To learn more about fees, check out our guide to unit trust and mutual fund fees here.

#4 – Exposure to complex bonds

A significant portion of the fund is invested in securitized bonds like mortgage-backed securities (MBS) and asset-backed securities (ABS). 

While these bonds can provide high yields, they are also complex and may not be as familiar to retail investors. 

However, by investing in this fund, individuals gain access to PIMCO’s expertise in managing these instruments.

Who manages the PIMCO GIS Income Fund? 

The fund is managed by Daniel J. Ivascyn, PIMCO’s Group Chief Investment Officer (CIO), alongside co-managers Alfred Murata and Joshua Anderson. 

PIMCO, established in 1971, is a global leader in bond investing, managing nearly $2 trillion in assets.

The fund became a flagship product after successfully navigating the 2008 Financial Crisis, capitalising on undervalued U.S. mortgage-backed securities.

Which share class of the PIMCO Income Fund is better?

The fund is available on multiple platforms in Singapore, with varying fees and minimum investment amounts.

POEMS and FSMOne offer both the Administrative and E share classes of the PIMCO GIS Income Fund. The Administractive class has an expense ratio of 1.05% p.a.

On the other hand, Endowus provides access to the Institutional share class with a lower total expense ratio of 0.55% p.a.

FSMOne and POEMS do not charge a platform fee. However, Endowus charges an annual management fee ranging from 0.25% to 0.30%, depending on the investment amount.

If you are buying the Institution share class of the PIMCO Income fund on Endowus, you would incur a cost of 0.85% p.a, comprising a total expense ratio of 0.55% p.a. and a platform fee of 0.30% p.a. 

If you are buying the Administrative share class of the PIMCO Income fund on FSMOne, POEMS or Mari Income Invest, you would incur a cost of 1.05% p.a, representing the expense ratio of the fund. 

If you are buying the E share class of the PIMCO Income fund on Moomoo, you would incur a cost of 1.45% p.a, representing the expense ratio of the fund. 

If you are buying the E share class of the PIMCO Income fund on OCBC, you would incur a cost of 2.27% p.a, comprising a total expense ratio of 1.45% p.a. and a platform fee of 0.80% p.a. 

To compare the best platform to purchase the PIMCO Income Fund, check out our guide to the best mutual fund platform in Singapore here. 

Minimum investment amounts differ too. 

The Institutional share class is available on Endowus for a minimum of S$1,000, the E share class is available on POEMS from as little as S$1, while the Admin class is available on Mari Income Invest from as little as S$1.

Orders must be submitted by 5 PM SGT on a business day, with settlements typically taking 3 days.

What would Beansprout do?

With a current distribution yield of 6.6%, the PIMCO GIS Income Fund offers a higher payout than T-bills. 

Its flexible portfolio provides access to diverse income opportunities, though it leans heavily toward US investments.

As one of PIMCO’s flagship fixed income funds, it has demonstrated resilience in delivering strong payouts across various market and interest rate cycles.

However, it’s important to note that the fund is not capital guaranteed.

Rising interest rates could impact its value, and some distributions may come from capital, potentially leading to total returns lower than the stated yield.

The PIMCO GIS Income Fund can be purchased through a mutual fund platform such as FSMOne, POEMS and Endowus. Check out our guide to the best mutual fund platform in Singapore here. 

Compare and choose the best bond fund for your portfolio here. 

Learn more about unit trusts in our comprehensive guide here. 

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