Your Mind Would Not Lead You to Buy Money Market Funds over a Pimco GIS Income Fund in 2017.

I wrote a couple of thoughts about different angle of this income unit trust Pimco GIS Income recently.

In one of the article, someone by the name of K commented that he has invested in the fund and he has expected better performance. Here is the article: Thoughts on Pimco GIS Income Fund’s Falling NAV and Income Consistency (for the Income Class).

I wish to provide K with a little of my personal perspective.

K explained that he invested in the SGD-hedged Pimco GIS Income fund since July 2017. If he adds back all the dividends, the total return is a disappointing 1.35% p.a. after holding for 8 years. Despite admittedly buying at a bad time, he expected better performance.

When I saw K’s comment I have two thoughts, and I will share the second one later. I thought the 1.35% p.a. return looks low. I know the returns for fixed income has not been good but that looks a little too low. So I went to the fund’s page and did a geometric return full year return calculation and arrive at a cumulative return of 22%, which works out closer to 2.4-2.5% p.a.

I gave K a fright or disappointed him with my calculation because it seems he made an error. But he hasn’t. The difference is that he bought in July and not January and he bought the units 6% higher than the start of the year. I did an XIRR calculation to work the returns and apologized to K that my rule-of-thumb calculation lead to a wrong conclusion.

He was right, and this experience kind of galvanize my belief that while we can be confident with our facts, I think we need to be open-minded when it comes to numbers.

I shared recently about my personal CPF numbers. I was surprised the amount it could grow to. This despite working with numbers for so long. I am not surprised by the power of compounding but sometimes the absolute figure hits home when the number is placed in front of you instead of it being a mental number. I would encourage folks to not speak too soon, let us see the numbers and then try to draw conclusions there because we could easily snook ourselves.

If you are interested in the numbers, here is my Google Spreadsheet. The sheet with “Your XIRR” would depict K’s investing experience, and the other sheet will show if he had invested at the start of the year. The last sheet gives him an idea that if the NAV remains at it is, and the income distribution is like current, how long would he have to hold for the annualized returns of 4% p.a (probably to Jan 2038).

Now on to the main point of the poor returns.

Why Did I Tell K Despite the Disappointment, He has Invested in One of the Best Fixed Income Funds

I told K that the saving grace is that he just invested in one of the better funds out there. Whenever we see poor performance, we might think we invested in the wrong fund, a poor fund but I just wish to say it as neutrally as possible: the Pimco GIS Income fund has performed well.

I tabulated the annualized returns from 1st July 2017 to End 2024 and also April 2025 for K’s benefit:

All of these fixed income indexes are in Singapore dollars or hedged to Singapore dollars. There is a cost to hedging and that cost would have factor into the performance. This allows K and you to assess the GIS Income fund performance of 1.35% p.a. against different indexes.

1. 1-3 years means the index invest in fixed income securities that matures in 1-3 years. So some of the index show the performance if the portfolio is shorter in maturity versus the longer maturity. The Bloomberg Global Aggregate without the 1-5 years, has a maturity averaging 8 years.
2. The Global Aggregate Bond index is a mixture of 50% government fixed income securities and 50% of something else.
3. The Bloomberg Corporate Bond Index is for us to see if there is some credit premium to be harvested during this period.
4. I also listed out the Unhedged, Hedged to USD and also both that is converted to SGD so that readers can see the magnitude of the difference.
5. I also listed the USD/SGD depreciation over the period.

It is important to realize that if you compare the performance of securities in different currencies, you might end up very incorrectly disappointed or happy. We should take note that the performance of our investment depends on:

1. The underlying securities held in the portfolio at different points of the investing experience.
2. When we have invested over.
3. The performance of long maturity security versus short maturity security.
4. The performance of securities with lower credit rating versus those with higher credit rating.
5. How and whether the portfolio is hedged.

The Pimco GIS Income have done better than the Bloomberg Global Aggregate Bond hedge to SGD because it owns more securities with shorter maturity and higher credit rating.

Most importantly, I gave a bunch of fixed income index over the same time frame and the results will look kind of disappointing to K.

But that is all there is, he managed to invest in fixed income over a challenging period.

If our strategy is buy and hold, then we have to acknowledge that our returns will be determine by what we buy. A income fixed income strategy will likely leave you with a manager that needs to lock in coupons for a period of time and that means investing in fixed maturity, fixed coupon fixed income securities.

The period where it won’t do so well is over a period where interest rate climbs so high up, which is the period that K went through. K could have picked another investment that does well over this period, but it is likely that the fund that K picked will not do well in “normal” environment.

Which brings me to my next point.

The Dangerous Thing About Investing after Reviewing Recent Historical Performance.

K reflects upon the performance and wonder if he has put the investment in money market funds instead of the Pimco GIS Income fund would the performance be better.

K should wonder if his performance is better hand he put all his money in Nvidia instead of a money market fund or Pimco GIS Income fund. He would probably be 5800% better off. When my colleague went to an investment meeting with people managing money, the conversation is not about had we invested in this fund or that strategy but how it would be had we invested in Nvidia.

I honestly think that K and all of us need to get out of that “how different would things be if we have invested in XXX instead of YYY.” mindset.

This is what some would say investing with a hindsight lens.

I find that it is very easy to:

1. Envision that we earn the historical average returns, or the returns of the last 5 years that coax us to invest in the first place.
2. Most of us acknowledge we are not able to know the future for many things. For example if our boss ask us how sure we are that sales will be able to deliver a 20% growth next three years, you know that is never a given despite how well you know the environment. However, we expect our returns to be very different from the other environments we operate in.

The are more uncertain than certain things in this world and returns is one of them.

Let me go through a few examples to explain investing with a hindsight lens is quite a challenge.

What you see here is the price chart of the S&P 500 index. I think many of us would know that the US market have done well. The average long term returns is 8-10% p.a.

If we go by the logic that K shared, you would be more comfortable investing in June of 1999 after reviewing its return in the past 10 years. But what K would have endured is a very different experience in his next 10 years (1999 to 2010) compare to what he reviews.

He would be underwater massively in 2009 but more so endure a roller coaster.

Now let us build on this:

Suppose instead K started his investment journey in 2010. He is evaluating what to invest. So we know that for the same period from 2003 to 2010, Emerging Markets were doing so well.

If you are K, and you review the past 10 years return of Emerging Markets versus US, where would you place the money? 396% return versus 43% return, which would you go for?

Different markets but the same situation happen.

A worse scenario would be of someone who was so disappointed with the performance of the US, decide to switch to Emerging Markets in 2010 and see his result in 2021. He might just swear off investing altogether.

Since K wonders if he would do better with money market funds, I actually wonder what would be his choice if he looked at the historical performance of a money market fund against the Pimco GIS Income fund. In the table below, I list the calendar year performance of the Fullerton Cash Fund, which is a SGD money market fund that should be the most popular money market fund in Singapore.

I have tabulated the Fullerton Cash Fund’s return against the returns of Bloomberg Global Aggregate Bond and Corporate Bond Index to help K see that, had he been at 2017, how hard or easy would he made to invest in money market funds.

The Pimco fund might not have such a long track record, and its return might be closer to that of these two index.

K would see that putting money in cash yields so low relative to these fixed income. Not just that, the word then is that putting money in bank deposits does not yield you much.

How likely is it that K would just let the money remain in money market funds?

More than likely, he would have led hindsight data dictate how he invest. And if you look at the fixed income fund returns, its over a reasonable long period (8 years), and they been splendid!

Average Historical Returns Does Not Explain Very Well Your Actual Investment Experience.

Most importantly, what you experience, and what you managed to harvest in returns is very different.

Those who you learn investing from may not be able to explain the experience very well. Living through and harvesting returns is filled with quite a lot of uncertainty and can be pretty emotional.

The returns of the MSCI Emerging Markets is about 7.5% p.a. on average since 2000, the S&P 500 about 10%. The Bloomberg Global Aggregate Bonds in USD has a return of 5% p.a. for the past 34 years since 1990.

What disappointed K may be that despite the average returns to be closer to 5% for the past 34 years, he experience a return to be far from it. This despite fixed income to be much less volatile.

I don’t know how to coach folks through this.

There are some clients/prospects/readers who got enlightened that they should have a financial plan, planned it out, and got invested in 2021. During the lowest point of the trade war volatility, they might have experience their investment go down 20% in 2022, went up to breakeven, climbed to 35%, and then went down to only 4-8% return after 4 years. A far cry from the nice 7%, 7%, 7%, 7% return that some have in their mind.

And now it is up back closer to 28% return or 6.3% p.a. return.

What you are giving up to earn that return is the anxiety or uncertainty whether you would earn that return unfortunately. That is the capital to be paid for return aside from the tangible cost.

The best thing I can show K is the pathway to a 4% p.a. return (which I did). He stuck with a manager that managed to keep a consistent payout for 9 years before starting to raise the payout, which did better than the fixed income benchmark.

What if at the end of 2038, he gets a 4% p.a. return over 21 years, with the income to supplement his goals? Would that be a good outcome?

I think a lot of us would be satisfied with that.

I acknowledge what he has to deal with is as comfortable as how we see some of our unrealized gains get wiped off despite investing for 2-3 years. The ones who managed to earn the returns eventually went through these sort of stuff as well. What is critical is to make sure that you have a good strategy, and you implement the strategy in a fundamentally sound way.

Sometimes We need to Review Each Area of our Investments. But We need to View the Portfolio in Aggregate More.

I am not sure if K only have a few of these unit trust fund, what is his overall strategy, or whether he has a strategy at all.

I think if you have a few different components, your overall returns might be more livable. Especially if yo understand the merits and demerits of diversification.

We mentioned a few investments, and if the investor starts investing in 1999 till today in a 33% S&P 500, 33% MSCI Emerging Market Index ETF, and 33% Bloomberg Global Aggregate Bond Index Fund, I think they will do decently well (I anyhow say one. There is no optimization here).

Sure, the S&P 500 will suck for 10 years. Sure the MSCI Emerging Market will suck for 10 years. Sure the Bloomberg Global Aggregate will suck for 4 years.

There will be an area of your diversified portfolio that suck. If it doesn’t, that means every part of your portfolios will move up and down relatively together. Would you want a portfolio like that? Some would. But if the goal is for a more livable portfolio if you invest for 30 years, it is better for some part of the portfolio to suck.

I find that we hunt for the one shiny, best investment fund, strategy out there with no downside too much and are too focus looking at it.

Sometimes, we might have to embraced the reality that we all don’t know the returns we are going to earn in the future, and set up a strategy more for that reality.

It may be one that is more diversified across asset classes, factors, not dependent on a single component too much, and embrace the returns.

Conclusion

Pimco’s fund return isn’t disappointing because it kept up with what the benchmark index is suppose to do. I think many of us expect the fund manager to outperform their benchmark and the fund did, just not the magnitude that were up to our standard.

I think the fund is not as disappointing because we seen more actively managed funds disappoint than outperform.

I can understand the weight of my reader’s investment decision and perhaps the uncertainty. These are our hard-earned money and we want to do right by our family to manage it in the best way possible. We will wonder if we made some grave error when we see the returns like this.

Despite investing for so long, I find myself dealing with these uncertainties as well. A good example would be how all the unrealized gains got wiped in the recent drawdown and doing nothing about it. I got to dig deeper and asked what is the right way to look at what I am seeing for my portfolio. What are the emotions clouding me and do they make sense. Sometimes, these are the opportunity to relearn some stuff, gain greater clarity and have greater conviction. Of course, you might realize you have made an error but if your introspection leads to better wealth and investment decisions in the future (and hopefully not too much capital impairment), then that is a good outcome.

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Kyith is the Owner and Sole Writer behind Investment Moats. Readers tune in to Investment Moats to learn and build stronger, firmer wealth foundations, how to have a Passive investment strategy, know more about investing in REITs and the nuts and bolts of Active Investing.

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Kyith worked as an IT operations engineer from 2004 to 2019. Currently, he works as a Senior Solutions Specialist in Insurance Start-up Havend. All opinions on Investment Moats are his own and does not represent the views of Providend.

You can view Kyith’s current portfolio here, which uses his Free Google Stock Portfolio Tracker.

His investment broker of choice is Interactive Brokers, which allows him to invest in securities from different exchanges all over the world, at very low commission rates, without custodian fees, near spot currency rates.

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