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PIMCO's New Pathfinder Fund Finds a Familiar Road

Managers Anne Gudefin and Chuck Lahr talk about opportunities in a market that has come a long way since March 2009.

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PIMCO EqS Pathfinder (PATHX), the renowned bond giant's first foray into actively managed equities, is less than a month old, but this is one newbie with a solid story behind it. Its managers, Anne Gudefin and Chuck Lahr, were poached in late 2009 from the esteemed Mutual Series group. They'd been running  Mutual Global Discovery (TEDIX) and other funds that practice a strict value discipline and maintain a real aversion to downside risk. Gudefin and Lahr demonstrated that risk-averse approach toward the end of 2008, when they made the decision to put more than a third of their previous fund's assets into cash, and then let that amount rise to nearly 50% in early 2009--bold decisions that limited the fund's losses as the market tanked.

Since then, of course, many global stock markets are up more than 50%, and the bargains of a year ago are fewer and further between. Given Gudefin and Lahr's strong performance record, their value leanings, and the current market environment, we were eager to hear from the managers. Are they finding great opportunities to populate their new fund? Or would they maintain a high cash level?

The Basics
Gudefin and Lahr will use a three-pronged approach at Pathfinder, just as they did at Mutual Series. The bulk of the portfolio will be composed of stocks from around the world that the managers consider undervalued. But they will also engage in merger-arbitrage deals and buy distressed debt. On the currency front, they'll maintain a flexible hedging policy.

Bridget B. Hughes does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.