The bets you are making now

Pimco's Sonali Pier seeks outperformance.

The youngest of three children and the daughter of Indian immigrants, Pierre set her sights on Wall Street after graduating from Princeton in 2003. She began her career at JPMorgan as a credit trader, a field that did not have many women.

“In the ladies’ room, I don’t meet a lot of people,” said Pierre, who moved from New York to California in 2013 to join Pimco.

Fortunately, it has seen a lot of changes over the years. Not only has there been some progress for women entering finance, but the culture has also changed since the financial crisis to be more inclusive, she said. In addition, she added, it is an industry where there is clear evidence of performance.

“There is accountability,” she said in a recent interview. “So, the gender role is starting to break down a little bit. With responsibility and accountability and a number in your name, it's very clear what your contributions are.”

Pierre has risen through the ranks since joining Pimco and is now a portfolio manager within the company's multi-sector credit business. The 42-year-old mother of two credits the mentors who helped her along the way, as well as her husband for supporting her and moving to California without anyone seeing her. Her father also raised her to value education and hard work, Pierre said.

“He was the quintessential example of the American dream,” she said. “Being able to see his hard work and so much progress meant that I never thought otherwise, that hard work wouldn’t lead to progress.”

Pierre's work did not go unnoticed. Morningstar has named her the winner of the 2021 Morningstar US Award for Investing Excellence in the Rising Talent category.

“Pierre's cautious contrast and growing influence at one of the industry's leading and most internally competitive fixed-income asset managers,” Morningstar said at the time.

Pierre is lead manager of Pimco's Diversified Income Fund, which has been among the best performers in its category — ranking 13th on a total return basis in 2023, according to Morningstar. The stock's 30-day yield is 5.91%, as of January 31.

“We really scan the global landscape extensively and then look for where the best opportunities are,” Pierre said. “It gets the investment-grade interest rate sensitivity, the high-quality parts of emerging markets, and the equity-like sensitivity of the high-yield, low-quality parts of emerging markets.”

The fund also invests in securitized assets, with about 23% of the portfolio allocated to the sector, as of January 31.

While the fund has a benchmark, the Bloomberg Global US Dollar Credit Hedging Index, it is “aware of the benchmark” and does not “embrace it,” Pierre said.

Morningstar described the fund as “outstanding.”

“Pimco Diversified Income continues to have a large staff, deep analytical resources and a proven approach that makes it a top choice for high-yield credit exposure,” Mike Mulash, a senior analyst at Morningstar, wrote in January.

It wasn't always smooth sailing. The fund has more international holdings and heavier credit risk than its peers, which has “derailed the portfolio” at times, as happened in 2022 during the conflict between Russia and Ukraine, Mulach said. However, he likes it in the long run.

So far this year, the fund has remained relatively flat on a total return basis.

In addition to also leading PDIIX, Pierre also serves as a manager on a number of other funds, including the PIMCO Multisector Bond Active ETF (PYLD), which launched in June 2023. It currently has a 30-day stock yield of 5.12%, as of On Tuesday, the adjusted expense ratio was 0.55%.

“It's maximizing return, looking for capital appreciation and, obviously, with the same PIMCO principles of wanting to keep up with the upside, while managing downside risk,” she said.

Currently, Pierre prefers developed markets over emerging markets and the United States over Europe.

In investment-grade companies, they prefer financial matters over non-financial matters. She said credit spreads widened in the financial sector due to concerns about regional banks.

“Maybe some of that is an explanation of the fact that they need to issue significant supplies year after year, but we think the metrics of, for example, the big six countries… look quite resilient on a relative basis,” Pierre said.

She noted that within corporate credit, the team looks at “the full flexibility of the toolkit.” She added that this may include derivatives and cash bonds.

“Are we looking at eurobonds or dollar bonds in the same structure? Front end or long end? Cash versus derivatives? However, we can efficiently express our view and trade that will lead to the best overall return,” Pierre said.

She also likes securitized assets, which she said can be more resilient during a recession. One of Pierre's favorites is the old non-agency mortgage-backed securities market.

“We have data on how long they've been in the home, how much home equity they've built up, what their mortgage rate is, how eager they are to pay, so we can see — are there any delinquencies?” She said. “We have a lot of data out there and a lot of comfort around this asset class.”

The agency's mortgage-backed securities are also attractive and could be a good alternative to A-rated corporate debt, she said.

About 60% of homeowners have a mortgage rate below 4%, according to a Redfin analysis of data from the Federal Housing Finance Agency's National Mortgage Database.

“It's more liquid, implicitly guaranteed by the government, and has a broadly similar spread,” she said.

Pierre finds the work exciting and encourages women to join her in the work.

“Anyone can excel and wants to do their best and wants to bet on themselves,” she said.