PIMCO Income Strategy Fund II: A Closed-End Fund for Diversified International Bond Issuances.

PIMCO Income Strategy Fund II (NYSE:PFN) is a closed-end fund that provides investors with leveraged exposure to a diversified portfolio of international bond issuances, including investment-grade and high-yield debt. The fund primarily invests in floating- and fixed-rate debt issuances, offering a diversified portfolio for investors seeking a balanced mix of income and growth.

The PIMCO Income Strategy Fund II (NYSE: PFN) is a closed-end fund designed to offer investors leveraged exposure to a diversified portfolio of international bond issuances. This fund, managed by PIMCO, primarily invests in floating- and fixed-rate debt, providing a balanced mix of income and growth for investors seeking a diversified portfolio.

PFN invests across various debt issuances, including investment-grade and high-yield bonds, with a 20% cap on CCC-rated and below issuances. The fund has a leverage-adjusted effective duration of 3.63 years, making it relatively low-risk in terms of rate policy. The strategy is primarily invested in 3-5-year issuances, with a heavier focus on longer-dated issuances. PFN's corporate filings indicate an effective leverage rate of 15.50%, which amplifies returns for investors [1].

The fund's portfolio is heavily weighted in the technology sector, making up 9% of the total portfolio weight. Additionally, PFN invests in US, European, and Brazilian issuances. A significant portion of the portfolio is concentrated in overnight index swaps, which are used as a hedge on rate policy. The fund also has notable positions in Altice France and Venture Global, which make up 2% and 1.3% of the total portfolio weight, respectively [1].

PFN has $677 million in assets under management, with an average of 277,000 shares changing hands daily. This provides investors with adequate depth for entering and exiting positions. The fund has an expense ratio of 174 basis points, which is relatively in line with peer fixed income CEFs. However, its performance has been somewhat marginal compared to peer strategies like the BlackRock Corporate High Yield Fund (HYT), which has charged a lower fee of 151 basis points and performed exceptionally well over longer historical periods [1].

In terms of distributions, PFN pays out monthly income with an annualized forward rate of $0.86 per share, yielding 11.44%. However, distributions have remained relatively stagnant since 2015, declining by $0.01 per share in 2021 to a monthly rate of $0.07 per share [1].

The fund's risks include exposure to high-yield issuances, which can be sensitive to economic stress, inflation, and trade uncertainty. Additionally, the strategy is exposed to interest rate risk through international and emerging market debt issuances, floating-rate issuances, and currency and rate hedges. The fund's portfolio has a large proportion of issuances with maturities in the range of 0–3 years, which could potentially add interest rate risk if rates were to decline [1].

In conclusion, PIMCO Income Strategy Fund II (PFN) offers investors a diversified portfolio of international bond issuances. However, given the risks associated with high-yield issuances and the fund's relatively marginal performance compared to peer strategies, investors should approach this fund with caution.

References:
[1] https://seekingalpha.com/article/4809312-pfn-provides-investors-with-diversified-portfolio-of-international-bond-issuances
[2] https://www.nasdaq.com/press-release/pimco-closed-end-funds-declare-monthly-common-share-distributions-2025-08-01