PCI: Rare Double-Digit Yields From An Elite Fund

A closed-end fund has a lot of benefits, providing immediate diversification.
PIMCO is one of the world's best fund managers.
We take a close look at PCI and the mortgage assets they hold.
For those looking to cash in on fear, investing in mortgages through PCI is a great opportunity.
Co-produced with Beyond Saving
Introduction: What are Closed-End Funds ('CEFs')
Closed-end funds, or CEFs, are funds that issue a fixed number of shares, which then trade on the open-market like common equities. The fund raises capital, which it then invests, often with leverage, and then pays a dividend to shareholders. So, when you buy a share of a CEF from someone else, you are buying a share of already existing assets held by the fund.
Since the number of shares is relatively fixed (like companies, CEFs can issue new shares to raise new capital), it's quite common for them to trade at a premium or discount to NAV, as the price is influenced by demand (or lack thereof) for the particular manager as it is by the value of the underlying collateral.
For retail investors, a CEF can be a great way to gain broad diversification in a sector through a single investment. A high-quality manager of a CEF can often outperform what an individual might be able to do themselves. Finally, some CEFs invest in sectors that are not readily available to retail investors.
The CEF we are looking at today hits all of those benefits. With a broad array of investments, managed by a world-class manager, and many of the investments are a type that a retail investor cannot easily trade.
About PCI
PIMCO Dynamic Credit Income Fund (PCI) is one of PIMCO's younger funds. PCI has been going strong, handily beating the market, for the past five years before COVID-19 took the wind out of its sails.

Data by YCharts
This negative impact has most likely been caused by PCI's significant exposure to mortgage-backed securities ('MBS'). The MBS market fell dramatically in... Read more