has made known it's on track to meet IRS
requirements for its PIMCO Commodity Real Return Fund
ahead of the June 30 deadline set by the Revenue Service.
In an interview
posted May 17 on the Web site of Allianz Global Investors
, distributor of the fund, PIMCO senior vice president and Real Return product manager Bob Greer
explained that the company has converted 95 percent of its asset base to comply with the stipulations of the IRS.
Last December, the IRS ruled that, to retain its favorable tax treatment as a mutual fund, the Real Return fund must obtain at least 90 percent of its gross income from sources of income that qualify as securities -- not, according to the IRS, commodity-linked swaps or other commodity-linked derivative instruments PIMCO had favored. The Newport Beach, California-based firm chose to move the fund's underlying investments to commodity-linked structured notes.
Greer said that as of Monday, May 15, the fund had over $12 billion -- or 95 percent -- of its commodity index exposure in notes issued by more than 18 different issuers. The figure was up from $5.4 billion converted as of April 7.
"The transition is virtually complete, and we believe that we will be able to manage the Fund in compliance with the IRS ruling. We expect management of the Fund to be uninterrupted, and we do not plan to close the Fund to new investors," said Greer.
He added that issuers were able to meet PIMCO's need for notes, but said PIMCO is also seeking to add other issuers with good credit. Finding brokers for commodities derivatives can be difficult: earlier this year, OppenheimerFunds
closed its Oppenheimer Real Asset Fund
, citing a dearth of issuers.
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