Hello, YieldAlley readers! In this issue:

💰 Meet the Trump administration’s 12 billionaires (Washington Post)

🐻 The Concentration Bears Have Steered You Wrong (Josh Brown)

😤 Google cofounder Sergey Brin said…staying retired ‘would’ve been a big mistake’ (Fortune)

📈 Is the Economy Improving Heading Into 2026? (Morningstar)

🤔 What's changing for retirement savers and retirees in 2026 (Yahoo Finance)

PIMCO Income Fund (PONAX) represents one of the bond market's most successful strategies over the past two decades, managing over $310 billion across various share classes as of March 2025. The fund has delivered a 6.8% annualized return since its April 2007 inception through March 2025, placing it at the top of the multisector bond category while maintaining lower-than-average volatility.

The fund is led by Dan Ivascyn, PIMCO's Group CIO, alongside co-managers Alfred Murata and Joshua Anderson. Ivascyn and Murata were named Morningstar Fixed-Income Managers of 2013, and the trio draws on PIMCO's extensive resources including roughly 50 real estate specialists and teams covering virtually every corner of the global bond market.

The strategy focuses on generating competitive returns and consistent monthly payouts, which the team reviews annually and adjusts when appropriate. Unlike traditional bond funds that stick to government securities or investment-grade corporates, PIMCO Income pursues opportunities across multiple sectors including high-yield corporates, emerging markets debt, and various securitized products. The fund typically employs some leverage through derivatives to enhance returns.

Nonagency residential mortgages have long been a cornerstone holding, though the allocation has declined from a recent high of 33% in February 2023 to 25% by March 2025. After the financial crisis, the team accumulated beaten-down housing bonds at attractive prices, benefiting from years of improving fundamentals as the sector recovered.

As the supply of legacy precrisis mortgages has shrunk dramatically, the managers have adapted their approach. They've purchased older mortgage loans directly from banks looking to clean up their balance sheets and expanded into newer nonagency structures. One notable area is reperforming loans: mortgages that Freddie Mac and Fannie Mae restructure after borrowers become delinquent, then sell back to the market without agency guarantees. These represented 10% of the portfolio in March 2025, accounting for 40% of total nonagency exposure.

The team has deliberately avoided or trod lightly in less-seasoned areas such as nonqualified mortgages and credit risk transfers that haven't been tested by severe housing market shocks. This prudent approach reflects their focus on risk management even while pursuing higher-yielding opportunities.

Beyond mortgages, the fund maintains meaningful allocations to corporate credit and developed international markets. The portfolio has carried a persistent short position to Japanese bonds. Emerging markets debt stood at 13.9% in March 2025, down sharply from a May 2021 peak of 29% as the managers scaled back exposure. Currency positioning has also been dynamic, with net exposure to non-US currencies declining to less than 4% by March 2025 from nearly 13% at the end of 2020. Recent positions included long exposures to Japan, Brazil, Mexico, and Turkey, combined with shorts against Taiwan, China, South Korea, and Switzerland.

The strategy has demonstrated consistent outperformance over the long term while navigating different market environments with varying degrees of success. Since inception in 2007, PONAX has turned a $10,000 investment into $16,102 through December 2025, compared to $14,184 for its category peers and $12,481 for the index.

The fund's resilience shone during 2022's bond market turmoil, when rising interest rates hammered most fixed-income investments. PONAX lost 8.18% that year, outperforming both its category (down 9.85%) and the index (down 12.89%). Overall caution and below-average duration helped cushion the blow, even as the portfolio carried 2-3% exposure to Russian bonds and currency heading into the year.

Performance in 2023 showed improvement with an 8.38% return, though it slightly trailed the category average of 8.13%. The year 2024 brought a 5.00% gain, essentially matching the 5.96% category return. Year-to-date through December 2025, the fund has delivered 10.32% compared to 7.42% for the category and 7.10% for the index, placing it in the top 4th percentile among 331 funds in its category.

Over longer periods, the fund's edge becomes more apparent. The three-year annualized return of 7.89% beats the category's 7.08%, while the five-year figure of 3.49% outpaces the category's 2.89%. The 10-year and 15-year annualized returns of 4.65% and 5.82% respectively demonstrate the strategy's ability to generate consistent outperformance across full market cycles.

These results reflect contributions from corporate bonds in 2023, particularly strong nonagency mortgage performance in 2024, and additional gains from currency positions, emerging markets, and government bond exposures across developed markets in the current year.

The fund's enormous asset base exceeds $310 billion across all vehicles, representing a more than 30% increase since the end of 2023. This growth raises natural questions about whether the strategy can continue executing its preferred sector allocations, particularly in less-liquid markets like nonagency mortgages.

Morningstar notes this as the primary concern preventing the fund from receiving its highest Process rating. The firm acknowledges PIMCO's unwillingness to entertain closing the fund should asset growth make it difficult to maintain sector preferences. PIMCO views the question differently, focusing instead on whether the portfolio can remain competitive with peers, and believes that's possible with an even larger asset base.

The management team's track record supports this confidence. They’ve been right thus far about managing growth without sacrificing performance. If anyone can handle the capacity challenge, this team's proven ability to capitalize on PIMCO's vast resources positions them well. Still, it remains an issue worth monitoring as assets continue growing.

The fund targets consistent monthly income, with managers setting a dividend rate they attempt to maintain for at least a year. The team prudently sets this payout below what the portfolio actually generates to avoid shortfalls. Undistributed income accumulates throughout the year and is paid as an extra dividend in December to comply with IRS distribution requirements.

For investors in the A-share class (PONAX), the expense ratio is 0.94% with a front-end load of 3.75%. The institutional share class (PIMIX) offers a lower 0.54% expense ratio but requires a $1 million minimum initial investment. Despite pricing that could be more competitive given PIMCO's massive scale, the firm believes its fees are fair based on what it consistently delivers for investors, an argument the long-term performance data appears to support.

Government Money Market Funds (7-Day Yields)

Brokered CD Rates (6-Month Rate)

ETFs (30-Day Yields)

Fidelity is offering select customers free TurboTax Premier for 2025 tax filing. These targeted promotions typically appear in mid-December and will display on your Portfolio Summary page when logging into Fidelity.com.

Check your Fidelity Portfolio Summary page now to see if you're targeted. TurboTax Premier normally runs $89-$129 depending on promotions, making this a solid $90-$130 value for eligible customers. The desktop download option at $5 represents better value if you prefer offline filing. If you're not seeing the offer but have substantial assets or trading activity at Fidelity, consider checking back periodically through early January as targeting may expand. Those needing multiple state returns should calculate whether the free federal filing plus paid additional states still beats alternative tax software pricing.