Pacific Investment Management Co. launched a new global benchmark in January that rethinks the way global bond markets are indexed. A mutual fund tracking the index is forthcoming.
The Pimco Global Advantage Bond Index (GLADI) weights bonds by gross national product rather than traditional market-cap sizing. Pimco says that a GDP methodology will help investors avoid pricing bubbles that are prone to develop for a benchmark trying to monitor markets worldwide.
The GLADI consists of five regional benchmarks, as well as the global umbrella index. The regions, and their weights in the global index, are as follows: U.S. (27.4 percent of the broad index), Eurozone (22.6 percent), Japan (9.8 percent), Emerging Markets (27.9 percent) and other industrialized economies (12.3 percent).
The Pimco GLADI consists of a mix of derivatives and fixed-income instruments, including corporate bonds and Treasury Inflation-Protected Securities, U.S. agency mortgage-backed securities, and interest rate swaps, among other investment vehicles. Each of those regional categories will be rebalanced every year. The GLADI’s subindexes that break down the different bond constituents by type will be rebalanced and reconstituted quarterly.
This marks Pimco’s first foray into bond indexing. It is the largest manager of fixed-income assets in the world.