According to an announcement, the fund’s investment policies have been revised to remove existing limits on investment in illiquid securities (currently 20% of net assets) and the use of derivatives for non-hedging purposes (currently 25% of total assets), effective immediately.
The Board of Trustees approved the changes based on a recommendation from Allianz and the fund’s sub-adviser, Pacific Investment Management Company LLC (“PIMCO”), that the removal of these restrictions provides additional investment flexibility to respond to changing market conditions and better aligns the fund’s policies with those of other Allianz closed-end bond funds sub-advised by PIMCO.
The announcement said that these changes will provide the fund with “additional investment flexibility to increase its use of credit default swaps and other derivative instruments, including interest rate swaps, futures and options as an efficient means to gain investment exposure to high-yield and other debt obligations in which the fund may invest directly.” In addition to general market risks, the fund’s use of derivative instruments involves risks different from, or possibly greater than, the risks associated with direct investments in securities, including illiquidity risk, leverage risk, correlation risk and counterparty risk, according to the firm.
The announcement also noted that the fund’s investments in illiquid securities may trade at a discount from comparable, more liquid investments, may be subject to wide fluctuations in market value and be more difficult to value, and the fund may not be able to dispose readily of illiquid securities when that would be beneficial at a favorable time or price.
According to the firm, the fund’s primary investment objective is to seek high current income. Capital appreciation is a secondary objective.
Allianz Global Investors Fund Management LLC, an indirect, wholly-owned subsidiary of Allianz Global Investors of America L.P., serves as the fund’s investment manager and is a member of Munich-based Allianz Group. Pacific Investment Management Company LLC, an Allianz Global Investors Fund Management affiliate, serves as the fund’s sub-adviser.