PIMCO Rides Income Fund Wave to Record Inflows, Sounds Caution on German Bonds

FRANKFURT, 19 January 2026 – Pacific Investment Management Company (PIMCO) has solidified its position as the world’s premier active bond manager, attracting nearly $100 billion in net client inflows in 2024 alone. This remarkable resurgence, spearheaded by the stellar performance of the PIMCO Income Fund, comes as the firm adopts a notably cautious stance on European debt, particularly German government bonds, in light of impending fiscal policy shifts.

The Resurgent Bond Powerhouse

A decade after the tumultuous departure of its founder Bill Gross, PIMCO has not only recovered but thrived under the leadership of Group Chief Investment Officer Dan Ivascyn and CEO Emmanuel Roman. The firm’s disciplined, team-based investment process and massive technological investment have translated into consistent outperformance. According to Morningstar data, 90% of PIMCO’s assets have outperformed their benchmarks over the past five years, after fees. This track record has fuelled a dramatic turnaround in client sentiment, with the firm capturing roughly half of all net inflows into the US bond mutual fund industry in 2024.

Key Facts: PIMCO at a Glance

The Income Fund Engine

The cornerstone of PIMCO’s success is the PIMCO Income Fund, managed by Ivascyn alongside Alfred Murata and Joshua Anderson. The fund’s institutional shares have delivered a 6.8% annualised return since Ivascyn took over in April 2007, consistently topping its multisector bond category. A strategic, long-term bet on US non-agency mortgage-backed securities after the 2008 financial crisis paid enormous dividends, helping to fuel returns for years. Although exposure to these legacy assets has decreased, the fund has successfully diversified into other securitised sectors, corporate credit, and global markets. The fund’s “halo effect” has driven growth across PIMCO’s entire suite of Income strategies, which now collectively manage over $400 billion.

Strategic Outlook: Bonds in an Age of Uncertainty

PIMCO’s current investment thesis centres on the compelling value of high-quality fixed income. The firm argues that with bond yields near 15-year highs and equity valuations stretched, bonds offer attractive absolute returns and a cushion against volatility. “With such attractive yields available across the global opportunity set, we find great value in fixed income markets today,” said Dan Ivascyn in a recent strategy update.

The firm’s Income Strategy is positioned with a slight overweight to interest rate exposure, favouring the intermediate part of the yield curve (5-10 year maturities). It maintains a significant overweight to US agency mortgage-backed securities, which currently offer a yield advantage over investment-grade corporate bonds. The strategy has reduced corporate credit exposure as spreads have tightened but remains engaged in selective opportunities, particularly in senior parts of the capital structure.

A Cautious Eye on Europe and German Bunds

PIMCO’s enthusiasm for fixed income is tempered by specific concerns in Europe. Economists at the firm note the eurozone’s struggle with stagnant GDP, structural issues like lagging technology, high energy costs, and intense global trade uncertainty. This has led to a generally cautious view on European duration.

This caution has intensified regarding German government bonds (bunds). Fund manager Sachin Gupta has added to an underweight position, citing the expected fiscal expansion under Chancellor-elect Friedrich Merz. Merz’s plans to unlock hundreds of billions of euros for defence and infrastructure investment, which recently gained key political backing, signal a pivotal shift away from Germany’s traditional fiscal conservatism.

“It is an important development,” Gupta stated. “It is not just about this announcement, it’s also about the future possible fiscal action.” The market has reacted: a sell-off in February pushed the yield on 10-year German bunds up by nearly 50 basis points to highs not seen since 2023. PIMCO has revised its expected range for the 10-year bund yield to 2.5%–3.5%, indicating potential for further repricing. The firm believes the European Central Bank (ECB) will monitor these fiscal developments closely and may adjust its policy path, though rate hikes are considered “way too premature.”

Frequently Asked Questions

What is PIMCO’s most successful fund?

The PIMCO Income Fund (PIMIX) is the firm’s flagship and the world’s largest actively managed bond fund. Its consistent, top-quartile performance over more than a decade has been the primary driver of PIMCO’s client inflows and renewed reputation.

Is PIMCO owned by Allianz?

Yes. PIMCO operates as an autonomous subsidiary of the German financial services giant Allianz SE, which acquired the firm in 2000. Allianz is the parent company and majority owner.

Why is PIMCO cautious on German bonds?

PIMCO’s caution stems from an expected major shift in German fiscal policy. The incoming government under Friedrich Merz plans significant increases in public spending on defence and infrastructure, likely leading to higher government bond issuance. This increased supply, coupled with a potential boost to economic growth and inflation, is negative for existing bond prices, pushing yields higher.

What are PIMCO’s main investment themes for 2025/2026?

Key themes include: the compelling value of high-quality bonds versus expensive equities; strategic overweight positions in US agency mortgages and asset-backed securities; a preference for intermediate duration (5-10 years); and selective, cautious allocation to global markets, with an underweight to European duration due to fiscal risks.