EuroStocksPLUS is a unique equity strategy which offers the potential for consistent excess returns over the Dow Jones Euro STOXX 50 while maintaining a very similar risk profile to that of the index. PIMCO manages EuroStocksPLUS by combining a non-leveraged position in synthetic Dow Jones Euro STOXX 50 instruments (primarily Index futures and sometimes Index swaps) with a short duration fixed income portfolio. The synthetic Euro STOXX 50 Index instruments capture the returns of the Index, while our active management of the short duration fixed income assets seeks to add incremental return above the Index. Because Euro STOXX 50 futures contracts are priced such that a combination of futures and money market investments should produce a return equal to that of the  Euro STOXX 50 index, our active management of the short duration assets seeks to outperform money market rates, thereby generating an incremental return over the Euro STOXX 50. Sometimes referred to as an enhanced index strategy, EuroStocksPLUS combines the benefits of index fund management with the potential for excess returns, at lower volatility of relative performance (tracking error) than is commonly associated with fully active equity management styles.

EuroStocksPLUS seeks to add value above the equity index by outperforming the money market based financing rate associated with equity futures and swaps. The sources of value added stem from a longer term horizon of institutional equity investors relative to the short-term, money marke rate. Key sources of value add include:

Active Short Duration Management
Credit Analysis (Risk Premiums)
Yield Management
Bottom Up Techniques to Identify Undervalued Securities
Quantitative Research
Cost Efficient Trading