Advanced Series Trust AST Academic Strategies Asset ... - Prudential
Advanced Series Trust AST Academic Strategies Asset ... - Prudential
Advanced Series Trust AST Academic Strategies Asset ... - Prudential
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e classified as developed markets. In general terms, a security will be considered to be an emerging market security if it is<br />
principally traded on the securities markets of an emerging market country, or if the issuer thereof is organized or principally operates<br />
in an emerging market country, derives a majority of its income from its operations within an emerging market country, or has the<br />
majority of its assets in an emerging market country.<br />
Under normal circumstances, PIMCO will invest at least 80% of the net assets attributable to this investment category in fixedincome<br />
instruments of issuers located outside the United States, representing at least three foreign countries, which may be<br />
represented by forwards or derivatives such as options, futures contracts, or swap agreements. Foreign currency exposure (from non-<br />
U.S. dollar-denominated securities or currencies) normally will be limited to 20% of the Portfolio’s total assets directly managed by<br />
PIMCO in an effort to reduce the risk of loss due to fluctuations in currency exchange rates.<br />
PIMCO will select the foreign country and currency compositions for each sub-category based upon its evaluation of various factors,<br />
including, but not limited to, relative interest rates, exchange rates, monetary and fiscal policies, trade and current account balances.<br />
The average portfolio duration for securities held in this investment category normally is expected to vary within a zero- to eight-year<br />
time frame. PIMCO may invest all of the assets attributable to this investment category in non-investment grade fixed-income<br />
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<br />
Fitch, or, if unrated, determined by PIMCO to be of comparable quality. Up to 10% of the total assets attributable to this investment<br />
category may be invested in preferred stock.<br />
Description of Non-Traditional Investment Categories and Sub-categories. The investment categories and sub-categories for which<br />
the PIMCO and PI will pursue non-traditional investment strategies include the following:<br />
■ <strong>Advanced</strong> <strong>Strategies</strong> I; and<br />
■ Commodities Real Return sub-category<br />
■ Real Return sub-category<br />
■ Real Estate Real Return sub-category<br />
■ <strong>Advanced</strong> <strong>Strategies</strong> II<br />
Brief descriptions of the investment strategies to be used by PIMCO and PI are set forth below:<br />
<strong>Advanced</strong> <strong>Strategies</strong> I: The <strong>Advanced</strong> <strong>Strategies</strong> I investment category will contain a Commodities Real Return sub-category, a Real<br />
Return sub-category, and a Real Estate Real Return sub-category. PI will direct PIMCO how to allocate assets among the Commodities<br />
Real Return sub-category, the Real Return sub-category, and the Real Estate Real Return sub-category based upon PI’s own forwardlooking<br />
assessment of macroeconomic, market, financial, security valuation, and other factors.<br />
The average portfolio duration for securities held in this investment category normally will vary within three years (plus or minus) of<br />
the real duration of the Barclays Capital U.S. TIPS Index. For these purposes, in calculating the average portfolio duration for this<br />
investment category, PIMCO includes the real duration of inflation-indexed portfolio securities and the nominal duration of noninflation-indexed<br />
portfolio securities. The assets attributable to this investment category may be invested in a limited number of<br />
issuers. Up to 10% of the total assets attributable to this investment category may be invested in preferred stock.<br />
<strong>Advanced</strong> <strong>Strategies</strong> I: Commodities Real Return Sub-category (PIMCO). Rather than invest directly in physical commodities, PIMCO<br />
will employ an “enhanced-index” strategy for this sub-category. Specifically, PIMCO will use commodity-index-linked derivative<br />
instruments, such as commodity swap agreements, with a goal of gaining 100% exposure to the investment return of the Dow Jones<br />
AIG Commodity Total Return Index, a widely followed measure of commodity prices. <strong>Asset</strong>s not invested in commodity-linked<br />
derivative instruments may be invested in inflation-indexed securities and other fixed-income instruments, including derivative fixedincome<br />
instruments. Inflation-indexed bonds offer a return that is linked to changes in the rate of inflation. The Portfolio’s investments<br />
in commodity-linked derivative instruments may subject the Portfolio to greater volatility than investments in traditional securities.<br />
The value of commodity-linked derivative instruments may be affected by changes in overall market movements, commodity index<br />
volatility, changes in interest rates, or factors affecting a particular industry or commodity, such as drought, floods, weather, acts of<br />
terrorism, livestock disease, embargoes, tariffs, and international economic, political and regulatory developments.<br />
<strong>Advanced</strong> <strong>Strategies</strong> I: Real Return Sub-category (PIMCO). This sub-category will focus primarily on investments in U.S. Treasury<br />
Inflation Protected Securities. The top-down investment process used by PIMCO for this sub-category will begin with its annual<br />
secular forum where PIMCO develops a 3-5 year outlook for the global economy and interest rates. This analysis will help set the<br />
basic sub-category parameters, including duration, yield-curve positioning, sector weightings, credit quality breakdown, and<br />
individual security selection. PIMCO will focus on duration management to manage yield curve exposure based on the firm’s general<br />
investment outlook.<br />
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