In an investment update, Tournier said she has also made a move to reduce high yield exposure – excluding bank loans – down to 22%, a far cry from historic highs of 40-45%.
Bank loans are proving increasingly popular among investors, with equity and bond managers seeking to capitalise on strength here. Tournier has historically held 0-2% in this area, so a rise to 8% marks a considerable investment.
‘Valuations are reflecting the benign outlook and, in our opinion, do not provide much compensation for potential disappointments. So we have been gradually de-risking throughout the year, taking advantage of the strong market conditions.
‘In high yield we have been de-risking there and rotating into bank loans, which are more high quality and defensive compared with high yield. We have been building that position in the portfolio towards 5-10% of the portfolio. We continue to be overweight financials, which remains a high conviction trade, and also overweight mortgage-backed securities.’
Elsewhere, Tournier said the duration exposure in the fund is being reduced to prepare for opportunities further down the line.
‘We have been gradually reducing duration in the portfolio and currently it stands below three and a half years.
'We have been taking some profit on Italian bonds and diversifying duration a little bit into the US and Australia, because we think those countries would have more room to cut rates in case of a more negative macro outlook.’
On a three-year total return basis to the end of October 2017, the Pimco GIS Euro Income Bond fund has returned 10.5% in euro terms, against a 7.3% rise by its Citywire-assigned benchmark, the Citi EuroBIG TR, over the same period.