Sonali Pier is a portfolio manager with Pimco
Pimco’s Sonali Pier strives for outperformance.
The youngest of three and the daughter of Indian immigrants, Pier set her sights on Wall Street after graduating from Princeton University in 2003. She began her career at JPMorgan as a credit trader, a field that has few women.
“In the ladies’ room, I don’t meet a lot of people,” said Pier, who moved from New York to California in 2013 to join Pimco.
Fortunately, it has seen many changes over the years. Not only has there been some progress for women entering the financial business, but the culture has also changed since the financial crisis and become more inclusive, she said. Moreover, it is an industry where there is clear evidence of performance, he added.
“There is accountability,” she said in a recent interview. “So the gender role starts to break down a little bit. With accountability and responsibility and a number to your name, it’s very clear what your contributions are.”
Pier has risen through the ranks since joining Pimco and is now a portfolio manager in the firm’s multi-sector credit business. The 42-year-old mother of two credits her guidance for helping her along the way, as well as her supportive husband who moved to California out of sight. Her father also raised her to value education and hard work, Pier said.
“He was the quintessential example of the American dream,” he said. “Being able to see his hard work and a lot of progress meant that I never thought otherwise, that hard work wouldn’t lead to progress.”
Pier’s work did not go unnoticed. Morning Star crowned her the winner of the 2021 US Morningstar Award for Investing Excellence in the Rising Talent category.
“Pier’s cautious contra accounting and growing influence at one of the leading and most internally competitive fixed income asset managers stands out,” Morningstar said at the time.
It implements its investment strategy
Pier is the lead manager at Pimco’s Diversified Income Fund, which has been among the top performers in its category β ranked in the 13th percentile on a 2023 total return basis, according to Morningstar. It has a 30-day SEC yield of 5.91%, as of January 31.
“We really look broadly at the global landscape and then look for where the best opportunities are,” Pier said. βIt takes interest rate sensitivity out of investment-grade, high-quality components of EM [emerging markets]and equity-like sensitivity from EM’s high yield and low-quality components.”
The fund also invests in securitized assets, with about 23% of the portfolio allocated to the sector as of January 31.
Pimco Income Diversified Fund
While the fund has a benchmark, the Bloomberg Global Credit Hedged USD Index, it is “benchmark-aware” and does not “embrace” it, Pier said.
Morningstar called the fund “standout.”
“Pimco Diversified Income’s extensive staffing, deep analytical resources and proven approach make it a top choice for higher yield credit exposure,” said Morningstar Senior Analyst Mike Mulach. he wrote in January.
It wasn’t always smooth sailing. The fund has more international holdings and a higher credit-risk profile than its peers, which sometimes “knocked the portfolio off course,” as it did in 2022 during the Russia-Ukraine conflict, Mulach said. However, he likes it in the long run.
So far this year, the fund has been relatively flat on a total return basis.
In addition to the also-leading PDIIX, Pier is also the manager of a number of other mutual funds, including the PIMCO Multisector Bond Active ETF (PYLD), which launched in June 2023. It currently has a 30-day SEC yield of 5.12% . from Tuesday and an adjusted expense ratio of 0.55%.
Performance of Multi-Sector Active Exchange Funds since inception on 21 June 2023.
“It’s maximizing return, looking for capital appreciation and obviously, with the same principles of Pimco wanting to continue the upside, but manage that downside risk,” he said.
Where Pier is bullish
Currently, Pier favors developed markets over emerging markets and the US over Europe.
In an investment grade business, she likes financials rather than non-financials. Credit spreads have widened in the financials because of concerns about regional banks, he said.
“Maybe some of that is justified by the fact that they have to issue a significant offering year after year, but we think the metrics of, say, the big six … look pretty resilient on a relative basis,” Pier said.
Under corporate credit, the team is looking at the “full flexibility of the toolbox,” he noted. This could include cash derivatives and bonds, he added.
“Do we see euro bond or dollar bond in the same structure? Front end or long end? Cash versus derivatives? However we can more effectively express our view and trade that will lead to the best overall return,” Pier said.
She also likes securitized assets, which she said can be much more resilient during a downturn. One of Pier’s preferences is buying legacy non-mortgage-backed securities.
“We have the data on how long they’ve been in the home, how much equity they’ve built, what their mortgage rate is, what their willingness to pay was, so we can see β is there any delinquency?” he said. “We have a lot of data there and a lot of comfort around that asset class.”
Mortgage-backed securities are also attractive and could be a good substitute for single-A corporate debt, he said.
About 60% of homeowners have a mortgage rate below 4%, according to a Redfin analysis data from the Federal Housing Finance Agency’s National Mortgage Database.
“It’s more liquid, it’s implicitly guaranteed by the government and it’s a pretty similar spread,” he said.
Pier finds the work exciting and encourages women to join her in the business.
“Anyone who wants to really do the work and wants to bet on themselves,” he said.