Advanced Series Trust AST Academic Strategies Asset ... - Prudential

e classified as developed markets. In general terms, a security will be considered to be an emerging market security if it is
principally traded on the securities markets of an emerging market country, or if the issuer thereof is organized or principally operates
in an emerging market country, derives a majority of its income from its operations within an emerging market country, or has the
majority of its assets in an emerging market country.
Under normal circumstances, PIMCO will invest at least 80% of the net assets attributable to this investment category in fixedincome
instruments of issuers located outside the United States, representing at least three foreign countries, which may be
represented by forwards or derivatives such as options, futures contracts, or swap agreements. Foreign currency exposure (from non-
U.S. dollar-denominated securities or currencies) normally will be limited to 20% of the Portfolio’s total assets directly managed by
PIMCO in an effort to reduce the risk of loss due to fluctuations in currency exchange rates.
PIMCO will select the foreign country and currency compositions for each sub-category based upon its evaluation of various factors,
including, but not limited to, relative interest rates, exchange rates, monetary and fiscal policies, trade and current account balances.
The average portfolio duration for securities held in this investment category normally is expected to vary within a zero- to eight-year
time frame. PIMCO may invest all of the assets attributable to this investment category in non-investment grade fixed-income
securities, subject to a limit of investing no more than 15% of such total assets in securities rated below B by Moody’s or by S&P, or
Fitch, or, if unrated, determined by PIMCO to be of comparable quality. Up to 10% of the total assets attributable to this investment
category may be invested in preferred stock.
Description of Non-Traditional Investment Categories and Sub-categories. The investment categories and sub-categories for which
the PIMCO and PI will pursue non-traditional investment strategies include the following:
■ Advanced Strategies I; and
■ Commodities Real Return sub-category
■ Real Return sub-category
■ Real Estate Real Return sub-category
■ Advanced Strategies II
Brief descriptions of the investment strategies to be used by PIMCO and PI are set forth below:
Advanced Strategies I: The Advanced Strategies I investment category will contain a Commodities Real Return sub-category, a Real
Return sub-category, and a Real Estate Real Return sub-category. PI will direct PIMCO how to allocate assets among the Commodities
Real Return sub-category, the Real Return sub-category, and the Real Estate Real Return sub-category based upon PI’s own forwardlooking
assessment of macroeconomic, market, financial, security valuation, and other factors.
The average portfolio duration for securities held in this investment category normally will vary within three years (plus or minus) of
the real duration of the Barclays Capital U.S. TIPS Index. For these purposes, in calculating the average portfolio duration for this
investment category, PIMCO includes the real duration of inflation-indexed portfolio securities and the nominal duration of noninflation-indexed
portfolio securities. The assets attributable to this investment category may be invested in a limited number of
issuers. Up to 10% of the total assets attributable to this investment category may be invested in preferred stock.
Advanced Strategies I: Commodities Real Return Sub-category (PIMCO). Rather than invest directly in physical commodities, PIMCO
will employ an “enhanced-index” strategy for this sub-category. Specifically, PIMCO will use commodity-index-linked derivative
instruments, such as commodity swap agreements, with a goal of gaining 100% exposure to the investment return of the Dow Jones
AIG Commodity Total Return Index, a widely followed measure of commodity prices. Assets not invested in commodity-linked
derivative instruments may be invested in inflation-indexed securities and other fixed-income instruments, including derivative fixedincome
instruments. Inflation-indexed bonds offer a return that is linked to changes in the rate of inflation. The Portfolio’s investments
in commodity-linked derivative instruments may subject the Portfolio to greater volatility than investments in traditional securities.
The value of commodity-linked derivative instruments may be affected by changes in overall market movements, commodity index
volatility, changes in interest rates, or factors affecting a particular industry or commodity, such as drought, floods, weather, acts of
terrorism, livestock disease, embargoes, tariffs, and international economic, political and regulatory developments.
Advanced Strategies I: Real Return Sub-category (PIMCO). This sub-category will focus primarily on investments in U.S. Treasury
Inflation Protected Securities. The top-down investment process used by PIMCO for this sub-category will begin with its annual
secular forum where PIMCO develops a 3-5 year outlook for the global economy and interest rates. This analysis will help set the
basic sub-category parameters, including duration, yield-curve positioning, sector weightings, credit quality breakdown, and
individual security selection. PIMCO will focus on duration management to manage yield curve exposure based on the firm’s general
investment outlook.
209