Is it Time to Rethink Your Core?

02/22/2017
Rethink your Core

Summary

Since traditional bonds are not currently offering the rewards of a decade ago, it may be time to rethink your core fixed-income allocation.

Tackling Today’s Market Risks by Looking Beyond Core Bonds

Investors need income despite a low-yield environment. With traditional bonds not currently offering the financial rewards they once did, now may be the time to rethink your core fixed-income strategy.

Reasons to consider AllianzGI Short Duration High Income Fund:

  • Manage interest-rate risk and volatility by investing in short-term, below-investment grade bonds
  • Provide consistent income potential (monthly distribution of $0.06 since January 2014)

Changing Profiles

Traditional core bonds are no longer delivering the risk/reward outcomes we were used to

  • Yield
  • Duration
  • 6.8%
  • 5.2%
  • 5.7%
  • 5.1%
  • 2.6%
  • 6.2%

As of 6/30/2017. Based on the Bloomberg Barclays US Aggregate Bond Index data. It is not possible to invest directly in an index.

Results Speak for themselves

Relative to core bonds (Bloomberg Barclays US Aggregate Bond Index) AllianzGI Short Duration High Income Fund Class I shares (ASHIX) has captured much of the markets upside over the last five years while shielding investors on the downside.

Upside Capture Downside Capture
  • ASHIX
  • +0.56%
  • +0.16%
  • US Agg Bond
  • +0.55%
  • -0.67%
  • ASHIX
  • +0.57%
  • -0.00%
  • US Agg Bond
  • +0.70%
  • -0.54%
  • ASHIX
  • +0.61%
  • -0.01%
  • US Agg Bond
  • +0.66%
  • -0.59%

Past performance is no guarantee of future results.
Source: Morningstar. All ratios calculated vs. BBgBarc US Agg Bond TR USD. View Morningstar glossary definition. As of 08/31/2017

Improving Returns

Adding AllianzGI Short Duration High Income Fund to a core fixed-income allocation may improve risk-adjusted returns

Improving Returns

Sources: IDS, Allianz Global Investors. Data as of first full month after fund inception 11/1/2011 – 6/30/2017. Class I shares. Morningstar US Intermediate Term Bond Fund Category consisting of 1,043 funds, these funds invest primarily in corporate and other investment-grade U.S. fixed-income issues and have an average duration of 3.5 to six years or (if duration is unavailable) an average effective maturity of four to 10 years. This does not represent the performance of an actual portfolio.

Performance quoted represents past performance. Past performance is no guarantee of future results. Investment return and the principal value of an investment will fluctuate. Shares may be worth more or less than original cost when redeemed. Current performance may be lower or higher than performance shown. For performance current to the most recent month-end, visit our website at us.allianzgi.com.

3 Key Ways to Manage Today’s Fixed-Income Risks

Not Like the Others

Built differently, the Fund is able to act distinct from the broader high-yield market

High-yield market performance during negative quarters

High-Yield market performance during negative quarters
  • AllianzGI Short Duration High Inc Instl
  • BofAML US Master II TR

Source: IDS, Allianz Global Investors. Data as of first full month after fund inception 11/1/2011 – 9/30/2016. Class I shares.

Past performance is no guarantee of future results.

Maximum Drawdown 6/1/2015 to 1/31/2016

  1. -4.5%
  2. -9.8%

Equipped for Uncertainty

The Fund has held up well during unfavorable stock and bond environments

Performance in S&P 500 down quarters

Perfromed well during equity down markets

Source: IDS, Allianz Global Investors. Data as of first full month after fund inception 11/1/2011 – 6/30/2017. Class I shares. Past performance is no guarantee of future results. During periods of strong equity market performance the Fund will likely underperform.

Lower duration provides less interest rate sensitivity

Reduced sensitivity to interest rates

Source: IDS, Allianz Global Investors. As of 6/30/2017.

All Risk Is Not Equal Risk

Taking on certain risk has the potential to be rewarding—benefiting returns over the long run

  • Identify total portfolio risk with Sharpe ratio
  • Identify downside risk with Sortino ratio
  • How we stack up:
  • Sharpe Ratio
  • Sortino Ratio
  • AllianzGI Short Duration High Income Fund
  • 1.52
  • 3.03
  • Bloomberg Barclays U.S. Aggregate Bond Index
  • 1.13
  • 2.09

The Outcome:

A strategy that is designed to provide investors with risk-adjusted returns over the long term.

Since inception from 11/01/2011-6/30/2016

Sharpe ratio is a risk-adjusted measure that is calculated by using standard deviation and excess return to determine reward per unit of risk. The Sortino ratio is calculated by using downside deviation (downside risk) and excess return to determine reward per unit of downside risk. Higher Sharpe and Sortino ratios indicate that investors are being compensated for the risk’s they are taking.

Our Focus

Provide investors with a strong risk/reward profile over time

Risk/Return (November 2011 to September 2016)

Provide investors with a strong risk/reward profile over time

Sources: AllianzGI, Morningstar. Data as of first full month after fund inception 11/1/2011 – 6/30/2017. Class I shares. It is not possible to invest directly in an index. Performance quoted represents past performance. Past performance is no guarantee of future results. High Yield Bonds represents the BofA Merrill Lynch US High Yield Master II Index. EM Bonds represents JPM EMBI Global Index. Core Bonds represents Bloomberg Barclays US Aggregate Bond Index. 10-Year Treasury represents US Treasury T-Bill 10 Year. 5-Year Treasury represents US Treasury T-Bill 5 Year. 1-3 Year US Govt. Credit represents Bloomberg Barclays US Government/Credit 1-3 Year Index. 1-3 Year Treasury represents Bloomberg Barclays 1-3 Year US Treasury Index.

Our Goal

Build a portfolio that offers investors a consistent income stream with reduced risk

Our philosophy:

We believe that there are structural inefficiencies that exist in the front-end of the non-investment grade bond market. And that these inefficiencies are opportunities that can be tapped into—with robust credit research and diligent risk management techniques

Defining our portfolio:

A high level of current income with lower volatility than the broader high-yield market

The ability to preserve capital—and liquidity—while minimizing volatility

A strategy that can support an investor's core fixed-income allocation

Our unique process:

Selected from the bottom up—our portfolio is made up of high-yield bonds and bank loans

We are benchmark indifferent and maintain an approach that is focused on outcomes

A concentrated portfolio built on a foundation of 60 to 80 high-conviction issuers

Average Annual Total Returns QTD 1 Year 3 Year 5 Year Since Inception
(10/3/2011)
AllianzGI Short Duration High Income Fund – A shares at NAV 1.52% 6.59% 3.86% 4.50% 5.27%
AllianzGI Short Duration High Income Fund – A shares at MOP -0.76% 4.19% 3.07% 4.03% 4.85%
AllianzGI Short Duration High Income Fund – I shares 1.62% 6.87% 4.12% 4.77% 5.55%
Merrill Lynch High Yield US Corporates Cash Pay BB Rated 1-3 Yrs USD Unhedged 1.43% 5.79% 3.96% 4.88% 5.87%
Morningstar US Intermediate Term Bond Fund Category 1.49% 0.94% 2.21% 2.45% 2.97%

As of 6/30/2017. Investment minimums, fees and expenses vary for different share classes. Other share classes are available.

Performance quoted represents past performance. Past performance is no guarantee of future results. Investment return and the principal value of an investment will fluctuate. Shares may be worth more or less than original cost when redeemed. Current performance may be lower or higher than performance shown. For performance current to the most recent month end, visit our website at us.allianzgi.com. The MOP returns take into account the 2.25% maximum initial sales charge. The Fund’sexpense ratio is 0.85% for class A shares and 0.58% for I shares.

Investors should consider the investment objectives, risks, charges and expenses of any mutual fund carefully before investing. This and other information is contained in the fund’s prospectus and summary prospectus, which may be obtained by contacting your financial advisor. Click Here for a complete list of the Allianz Funds prospectuses and summary prospectuses. Please read them carefully before you invest.

A Word About Risk: High-yield or “junk” bonds have lower credit ratings and involve a greater risk to principal. Derivative prices depend on the performance of an underlying asset; derivatives carry market, credit and liquidity risk. Investments in smaller companies may be more volatile and less liquid than investments in larger companies. Foreign markets may be more volatile, less liquid, less transparent and subject to less oversight, and values may fluctuate with currency exchange rates; these risks may be greater in emerging markets. Bond prices will normally decline as interest rates rise. The impact may be greater with longer-duration bonds. Unlike US Treasuries and T-bills, the securities in which the Fund invests are not guaranteed as to timely payment of interest and principal and are subject to greater risk. The market for certain securities may become illiquid, which could prevent the Fund from purchasing or selling these securities at an advantageous time or price and possibly delay redemptions of Fund shares.

Holdings are subject to change. The statements above reflect the typical investment philosophy and process applied to this strategy. At any given time, other factors may affect the investment process.

Standard deviation measures the volatility of a security and is derived from the security’s historical returns. The higher the standard deviation, the greater the risk. Duration is a measure of a portfolio’s price sensitivity expressed in years. Yield refers to the interest or dividends received from a security and is usually expressed annually as a percentage based on the investment’s cost, its current market value or its face value. Years to Maturity is the bond maturity computed by using the earlier of either the call date or the final maturity date.

The Bloomberg Barclays US Aggregate Index is an unmanaged index of investment-grade, US dollar-denominated, fixed-income securities of domestic issuers having a maturity greater than one year. The BofA Merrill Lynch High Yield Master II Index tracks the performance of below investment grade (BBB), but not in default, US dollar-denominated corporate bonds publicly issued in the domestic market. The JPMorgan Emerging Market Bond Index (EMBI) are a set of three bond indices to track bonds in emerging markets operated by J P Morgan. The indices are the Emerging Markets Bond Index Plus, the Emerging Markets Bond Index Global and the Emerging Markets Bond Global Diversified Index. The Standard & Poor’s 500 Composite Index is an unmanaged index that is generally representative of the US stock market. The BofA Merrill Lynch 1-3 Year BB US Cash Pay High Yield Index is a subset of the BofA Merrill Lynch US Cash Pay High Yield Index including all securities with a remaining term to final maturity of less than three years and rated BB1 through BB3, inclusive. US Government bonds and Treasury bills are guaranteed by the US Government and, if held to maturity, offer a fixed rate of return and fixed principal value. Bloomberg Barclays US Government/Credit 1-3 Year Index is the 1-3 Yr component of the Barclays Global Treasury Index. The Bloomberg Barclays Global Treasury Index tracks fixed-rate local currency government debt of investment grade countries. The Bloomberg Barclays 1-3 Year US Treasury Index is composed of all bonds of investment grade with a maturity between one and three years. Unless otherwise noted, index returns reflect the reinvestment of income dividends and capital gains, if any, but do not reflect fees, brokerage commissions or other expenses of investing. It is not possible to invest directly in an index.

Minimum investment for Institutional shares is $1 million, though this may be reduced for certain financial intermediaries that aggregate trades on behalf of investors.


105007

Consistent Income Amid Historically Low Yields

03/14/2017

Summary

During a decade of historically low interest rates and yields, AllianzGI Income & Growth Fund delivered consistent income every month. Portfolio Manager Doug Forsyth explains how the Fund plans to keep the streak moving forward in 2017.

Volatility Defense Interest Rate Protection Income Consistency Growth Dedicated Team Strong History 10 Years Anniversary Volatility Defense Interest Rate Protection Income Consistency Growth Dedicated Team Strong History 10 Years Anniversary Volatility Defense Interest Rate Protection Income Consistency Growth Dedicated Team Strong History 10 Years Anniversary Volatility Defense Interest Rate Protection Income Consistency Growth Dedicated Team Strong History 10 Years Anniversary Volatility Defense Interest Rate Protection Income Consistency Growth Dedicated Team Strong History 10 Years Anniversary Volatility Defense Interest Rate Protection Income Consistency Growth Dedicated Team Strong History 10 Years Anniversary Volatility Defense Interest Rate Protection Income Consistency Growth Dedicated Team Strong History 10 Years Anniversary Volatility Defense Interest Rate Protection Income Consistency Growth Dedicated Team Strong History 10 Years Anniversary Volatility Defense Interest Rate Protection Income Consistency Growth Dedicated Team Strong History 10 Years Anniversary Volatility Defense Interest Rate Protection Income Consistency Growth Dedicated Team Strong History 10 Years Anniversary Volatility Defense Interest Rate Protection Income Consistency Growth Dedicated Team Strong History 10 Years Anniversary Volatility Defense Interest Rate Protection Income Consistency Growth Dedicated Team Strong History 10 Years Anniversary Volatility Defense Interest Rate Protection Income Consistency Growth Dedicated Team Strong History 10 Years Anniversary Volatility Defense Interest Rate Protection Income Consistency Growth Dedicated Team Strong History 10 Years Anniversary Volatility Defense Interest Rate Protection Income Consistency Growth Dedicated Team Strong History 10 Years Anniversary Volatility Defense Interest Rate Protection Income Consistency Growth Dedicated Team Strong History 10 Years AnniversaryVolatility Defense Interest Rate Protection Income Consistency Growth Dedicated Team Strong History 10 Years Anniversary Volatility Defense Interest Rate Protection Income Consistency Growth Dedicated Team Strong History 10 Years Anniversary Volatility Defense Interest Rate Protection Income Consistency Growth Dedicated Team Strong History 10 Years Anniversary Volatility Defense Interest Rate Protection Income Consistency Growth Dedicated Team Strong History 10 Years AnniversaryVolatility Defense Interest Rate Protection Income Consistency Growth Dedicated Team Strong History 10 Years Anniversary Volatility Defense Interest Rate Protection Income Consistency Growth Dedicated Team Strong History 10 Years Anniversary Volatility Defense Interest Rate Protection Income Consistency Growth Dedicated Team Strong History 10 Years Anniversary Volatility Defense Interest Rate Protection Income Consistency Growth Dedicated Team Strong History 10 Years Anniversary Volatility Defense Interest Rate Protection Income Consistency Growth Dedicated Team Strong History 10 Years Anniversary Volatility Defense Interest Rate Protection Income Consistency Growth Dedicated Team Strong History 10 Years Anniversary Volatility Defense Interest Rate Protection Income Consistency Growth Dedicated Team Strong History 10 Years Anniversary

10 Years, 1 Consistent Income and Growth Solution

AllianzGI Income & Growth Fund has been providing clients with a steady stream of monthly distributions and an asymmetric risk-return profile—regardless of the market environment—for the last 10 years.

AllianzGI Income & Growth Fund is a single investment vehicle that can be used in a wide range of ways to help support an investor's income goals—and address financial concerns.

Guard against a rising rate environment

Since 2013, there have been four separate periods when US Treasury yields rose more than 50 basis points and bond prices plummeted. Here's how the Fund held up.

"Taper Tantrum"
(5/2/2013 – 9/5/2013)
Fed Announces Easing
(10/23/2013 – 12/31/2013)
“Bund Tantrum”
(1/30/2015 – 6/26/2015)
Current Environment
(7/5/2016 – 3/13/2017)
10-Year Treasury Yield 1.66% -2.98% 2.51% -3.04% 1.68% -2.49% 1.37% -2.62%
AllianzGI Income and Growth Fund Return (A share) 3.22% 3.32% 4.08% 10.58%
Bloomberg Barclays U.S. Agg. Bond Index Return -4.85% -0.96% -2.44% -3.21%

Source: Morningstar Direct, data as of 6/30/2017. Past performance is no guarantee of future results.

Dampen market volatility

For more than 10 years, AllianzGI Income & Growth Fund has been a multi-asset tool offering investors equity-like returns with a lower risk profile than an all-equity portfolio.

3/1/2007 – 6/30/2017

Return (% Annualized)

AllianzGI Income & Growth Fund (I Share)

S&P 500 Index

  1. 8
  2. 6
  3. 4
  4. 2
  5. 0
  1. 0
  2. 2
  3. 4
  4. 6
  5. 8
  6. 10
  7. 12
  8. 14
  9. 16
  10. 18

Risk (% Annualized)

Source: Morningstar.

Deliver consistent income

The Fund has a proven track record of consistently generating income through monthly distributions—and it's held steady through 10 years of uncertain markets.

Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec
2008 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.4712*
2009 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875
2010 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.1136*
2011 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.1125*
2012 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875
2013 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875
2014 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875
2015 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875
2016 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0825 $0.0825 $0.0825
2017 $0.0825 $0.0825 $0.0825 $0.0825 $0.0825 $0.0825

Source: US Federal Reserve, Allianz Global Investors. Distribution history shown is for Class A shares of the fund. Past performance is no guarantee of future results.

*Aggregate of monthly and special distributions made in these months: Dec. 2008, $0.4712; Dec. 2010, $0.1136; Dec. 2011, $0.1125.

105007

Connect With Us
Stay up-to-date with social media
Contact Allianz Global Investors
For more information on our products and services
Contact Us