Closure of two PIMCO bond funds

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On 27 July 2016, both the Scottish Equitable PIMCO Select UK Corporate Bond fund and the Scottish Equitable PIMCO Select Global Bond fund will close.

When the funds close, current investors will be transferred to the Scottish Equitable Kames Sterling Corporate Bond fund(Opens new window)(Opens new window) or the International Bond Select Portfolio(Opens new window)(Opens new window) respectively, unless they tell us to move their investment elsewhere before then.

The charges investors pay for both funds will also remain the same. 

We’ve written to those affected in advance to tell them about these closures.

Why are the funds closing?

In both cases, the underlying funds have not grown as expected meaning that they have become too small to be economically viable. As a result, PIMCO decided to close the funds.

How we chose the alternative funds

We selected both the Scottish Equitable Kames Sterling Corporate Bond fund and the International Bond Select Portfolio as they are very similar to the funds they are replacing in terms of risk, objectives and what they invest in.

The Scottish Equitable Kames Sterling Corporate Bond fund aims to maximise total return (income plus capital growth) by investing mainly in sterling denominated bonds including investment grade corporate bonds and cash. It may also invest up to 10% in high yield bonds and is permitted to invest in deposits, money market instruments, derivative instruments and forward transactions. The additional disclosable yearly charges will reduce from 0.7% to 0.4% for investors in this fund.

The International Bond Select Portfolio differs slightly from the Scottish Equitable PIMCO Global Select Bond fund it replaces in that it is a fund of funds – a fund that invests in a number of other funds with the aim of meeting the overall fund’s objective.

It aims to provide a good level of long-term capital growth by investing in a number of high-quality global fixed interest (bonds) funds from different managers, recommended by independent researchers Morningstar.

The portfolio targets returns above the JPMorgan Global GBI ex Japan Index over rolling three-year periods, and Morningstar helps us to select and manage the blend of funds on an ongoing basis to help it achieve this.

How does this affect current investors?

Current investors can stay invested and continue to pay in any regular contributions as normal until the funds close.

We'll be writing to investors in both funds shortly to tell them about the closure and give them the option to transfer into another fund of their choice, free of any switch charges, if they want to.

The value of investments can go down as well as up. There's a risk investors may get back less than they invested.