The PIMCO Income Strategy Fund II (NYSE: PFN) is a closed-end fund that is ideal for income-focused investors seeking exceptionally high current income from their portfolios. With a distribution yield of 12.15% as of the time of writing, this fund offers an attractive double-digit yield, outperforming many of PIMCO’s other closed-end funds.
Comparison to other funds as follows:
– PIMCO Income Strategy Fund (PFL): 11.74%
– PIMCO Dynamic Income Opportunities Fund (PDO): 12.61%
– PIMCO Access Income Fund (PAXS): 12.71%
– PIMCO PCM Fund (PCM): 11.66%
This indicates that PIMCO’s funds offer relatively comparable yields due to their shared investment in fixed-income vehicles and reliance on similar research.
The market has seen a strong bond performance since October, with the PIMCO Income Strategy Fund II’s share price up 6.78%. However, the recent gains may reverse next year due to the Federal Reserve’s desire to keep financial conditions tighter than the market projects. For income investors, the fund’s ability to sustain its distribution is more important than short-term price swings.
The fund aims to provide a high level of current income while preserving capital. Although it does not use a buy-and-hold strategy, its 33.00% annual turnover suggests some trading activity. The 4.09% expense ratio is higher than an index fund but may be worth it if the fund delivers a return above the market.
Over the past ten years, the PIMCO Income Strategy Fund II has declined by 29.40% compared to the Bloomberg U.S. Aggregate Bond Index’s 7.43% decline, but it outperforms in distributions. However, the fund does not employ its flexibility to allocate assets among floating-rate and fixed-rate debt instruments effectively, potentially impacting its performance.
Investors should carefully consider the fund’s investment strategy before purchasing, as the market’s current gains may reverse next year. Despite this, the fund’s ability to provide high current income makes it a compelling option for income-focused investors.
