Investment management firm PIMCO Australia has expanded its pipeline of new mandates, with the sovereign debt crisis in Europe sparking a shift towards active fixed interest management.
"We are seeing some interest from institutions that previously had money in some passive strategies. With all the things that are going on with sovereign debt risk they are starting to realise that just investing in the index is in itself not risk free," PIMCO global wealth management vice president Matthew McLenaghan said.
The removal of debt-stricken Greece from global fixed interest benchmarks, including the Citigroup World Government Bond Index and Barclays Global Aggregate Index, at the end of last month had prompted many investors to reconsider the risks of investing under a passive strategy, McLenaghan said.
Moody's Investors Service downgraded Greece's creditworthiness in June, slashing its ratings from investment grade to junk bond status, or from A3 to Ba1.
Standard & Poor's already cut its ratings to similar low levels in April.
"[The rating] needs to be investment grade to be in the indices," McLenaghan said.
"Greece is essentially removed from the index and if you are a passive investor and you are holding Greece, you are basically forced to sell Greece at the worst possible time."
This situation demonstrated who the greater flexibility of active management could help avoid such losses, he said.
"Active managers can avoid those countries where debt is becoming an increasing problem," he said.
"We have been very mindful to Greece and we didn't have any exposure to 'Club Med' countries."
The shift to active management was further stimulated by the greater volatility in the markets, which could often produce opportunities, he said.
PIMCO has experienced an increase in mandates on the back of this development.
"We've got a few new mandates in the pipeline that we are at the final stages of developing and we are in discussions with a number of clients that are brand new to us and existing clients topping up mandates," McLenaghan said.
He could not name any of the clients, but said they were superannuation funds that were looking for separately managed investment mandates of $80 million and above.
