February 13, 2020
Patrick Valenti, Esq.
Ropes & Gray LLP
191 North Wacker Drive
Chicago, IL 60606
Re: PIMCO Tactical Income Fund
File Nos. 333-235966 and 811-23505
Dear Mr. Valenti:
On January 17, 2020, you filed a registration statement on Form N-2 for
PIMCO Tactical
Income Fund (the "Fund"). Our comments are set forth below. For convenience, we
generally
organized our comments using the headings, defined terms and page numbers from
the
registration statement. Where a comment is made with respect to the disclosure
in one location
of the filing, it applies to all similar disclosure found elsewhere.
PROSPECTUS
Cover Page
1. The second sentence under "Leverage" states that the Fund may enter into
credit default
swaps. Please disclose whether the Fund will buy and/or sell credit default
swaps.
Prospectus Summary
2. We note that the synopsis is 41 pages long. The synopsis should provide a
"clear and concise
[emphasis added]" description of the key features of the offering and the
Fund, with cross-
references to relevant disclosure elsewhere in the Prospectus or Statement
of Additional
Information. Please revise. See Instruction to Item 3.2. of Form N-2.
Patrick Valenti, Esq.
Page 2
February 13, 2020
Prospectus Summary -- Investment Objectives and Strategies (pages 3 - 5)
3. The second sentence of this section states that the Fund may invest through
Subsidiaries.
Please respond to the following comments with respect to the Subsidiaries,
including the
REIT Subsidiary.
a. Disclose that the Fund complies with the provisions of the Investment
Company Act of
1940 ("1940 Act") governing investment policies (Section 8) and capital
structure and
leverage (Section 18) on an aggregate basis with the Subsidiaries.
b. Disclose that each investment adviser to a Subsidiary complies with
provisions of the
1940 Act relating to investment advisory contracts (Section 15) as an
investment adviser
to the Fund under Section 2(a)(20) of the 1940 Act. Please confirm that
the investment
advisory contract between a Subsidiary and its investment adviser is
filed as an exhibit to
the registration statement.
c. Disclose that each Subsidiary complies with 1940 Act provisions relating
to affiliated
transactions and custody (Section 17).
d. Disclose any of a Subsidiary's principal investment strategies or
principal risks that
constitute principal investment strategies or principal risks of the
Fund.
e. Confirm to us that the financial statements of each wholly-owned
Subsidiary will be
consolidated with those of the Fund.
f. Confirm in correspondence that (a) a Subsidiary's management fee
(including any
performance fee) will be included in the "Management Fee" line item of
the fee table and
a Subsidiary's expenses will be included in the "Other Expenses" line
item of the fee
table; (b) if a Subsidiary is not organized in the U.S., the Subsidiary
and its board of
directors will agree to designate an agent for service of process in the
U.S.; and (c) a
Subsidiary and its board of directors will agree to inspection by the
staff of the
Subsidiary's books and records, which will be maintained in accordance
with Section 31
of the 1940 Act.
Prospectus Summary -- Investment Objectives and Strategies -- Portfolio
Management
Strategies -- Duration Management (page 5)
4. The fifth sentence of this section states that the Fund's duration strategy
may entail
maintaining a negative average portfolio duration from time to time, which
would potentially
benefit the portfolio in an environment of rising market interest rates but
generally adversely
impact the portfolio in an environment of falling or neutral market interest
rates. Please
disclose how the Fund would seek to achieve its investment objective by
maintaining a
negative average portfolio duration. Please also clarify how maintaining a
negative average
portfolio duration would "potentially benefit" or "adversely impact" the
Fund's portfolio
(e.g., portfolio would rise in value or fall in value).
Patrick Valenti, Esq.
Page 3
February 13, 2020
Prospectus Summary -- Portfolio Contents (pages 5 - 7)
5. The first paragraph of this section sets forth the types of debt obligations
and numerous other
instruments in which the Fund may invest. Please review this disclosure and
limit the
disclosure to only the types of investments in which the Fund will
principally invest. Please
move disclosure of any non-principal investments to a separate section
outside of the
Prospectus Summary. See Item 8.2.b.(1) of Form N-2. See also Item 8.4. of
Form N-2 and
Instruction a. thereto; ADI 2019-08 Improving Principal Risks Disclosure
(at text
preceding footnote 7).
6. The second paragraph of this section states that the Fund's real estate
investments may
include direct investments in commercial and residential real estate,
including land, for-sale
and for-rent housing, office, hotel, retail and industrial investments.
Please disclose the limit
on the Fund's direct investment in real estate, including investments made
by the REIT
Subsidiary. Also, please provide us with a detailed analysis on how the Fund
is an
"investment company" as defined in Section 3(a)(1)(A) or Section 3(a)(1)(C)
of the 1940
Act. In your response, please address why the Fund will establish a REIT
Subsidiary through
which it can hold real property and how this affects the investment company
status analysis.
We may have more comments after reviewing your response.
7. Please disclose any targeted allocation the Fund expects to have for its
portfolio with respect
to real estate and real estate-related investments.
8. Please disclose how the Fund seeks to achieve its investment objective
through its direct
investments in commercial and residential real estate (i.e., how the Fund
will receive income
from these investments and how these investments will achieve capital
appreciation). Please
also describe in greater detail the Fund's direct investments in commercial
and residential
real estate (e.g., whether the Fund will invest in foreign real estate; what
types of land,
residential, office, retail and industrial properties the Fund will hold).
In addition, please
enhance the risk disclosure of the Fund's direct investments in real estate
in the Principal
Risks of the Fund section of the Prospectus to reflect the specific
corresponding risks of the
types and location of real estate in which the Fund will invest.
9. On page 6, the last sentence of the fifth paragraph states that the Fund may
engage in short
sales. Please confirm whether the Fund intends to use short sales and, if
so, please include an
estimate of dividend and interest expense on short sales in the fee table.
Alternatively, please
disclose that the Fund has no current intention to engage in short sales
(i.e., the Fund will not
engage in short sales within one year of the effective date of the
registration statement).
10. On page 6, the second sentence of the sixth paragraph states that the Fund
may invest in other
investment companies. Please confirm that, if necessary, the expenses of
such investments
will be reflected in a separate Acquired Fund Fees and Expenses line item
in the fee table.
See Instruction 10 to Item 3.1 of Form N-2.
Patrick Valenti, Esq.
Page 4
February 13, 2020
11. On page 6, the seventh paragraph states that the Fund may invest without
limit in illiquid
investments. Please prominently disclose this on the Prospectus cover page
(e.g., in bold).
Prospectus Summary -- Leverage (pages 7 - 9)
12. On page 8, the second paragraph states that the REIT Subsidiary may utilize
leverage and
that the Fund will not treat such non-recourse borrowings as senior
securities as defined in
the 1940 Act for purposes of complying with the 1940 Act's limitations on
leverage. Please
explain to us why these borrowings are not senior securities of the Fund
under Section 18 of
the 1940 Act. We may have more comments after reviewing your response.
Prospectus Summary -- Dividends and Distributions (pages 9 - 11)
13. On page 11, the disclosure states that a return of capital would occur
where the Fund
distribution represents a return of a portion of your investment, rather
than net income or
capital gains generated from your investment. Please tell us whether it is
expected that the
Fund will make a significant amount of return of capital distributions in
its first year of
operations. If so, please prominently disclose on the Prospectus cover page
that the Fund
expects to make return of capital distributions and that such distributions
do not represent
income.
Prospectus Summary -- Principal Risks of the Fund (pages 11 - 41)
14. This section sets forth 68 risks. Please review this risk disclosure and
limit it so that it only
includes the Fund's principal risks. Please move any non-principal risks to
a separate section
outside of the Prospectus Summary. See Item 8.3.(a) of Form N-2; ADI
2019-08
Improving Principal Risk Disclosure (at text preceding footnote 7).
Prospectus Summary -- Principal Risk Factors -- Limited Term Risk (pages 12 -
14)
15. The second paragraph of this risk factor states that if, on the Dissolution
Date, the Fund owns
securities for which no market exists or securities that are trading at
depressed prices, such
securities may be placed in a liquidating trust. Please disclose whether or
not the liquidating
trust will be a registered investment company.
Prospectus Summary -- Principal Risk Factors -- Real Estate Industry Risk (page
18)
16. Please disclose, if accurate, that the Fund will bear property level
expenses (e.g, property
management expenses, disposition of real estate expenses, financing
expenses) with respect
to its real estate holdings. Also, please confirm that all property level
expenses will be
reflected in the fee table. In addition, please tell us what percentage of
"Total Annual
Expenses" will consist of expenses the Fund will bear in connection with
its holdings of real
estate. We may have more comments after reviewing your response.
Patrick Valenti, Esq.
Page 5
February 13, 2020
Prospectus Summary -- Principal Risk Factors -- REIT Subsidiary Risk (pages 35
- 37)
17. On page 37, the first paragraph states that the REIT Subsidiary will have
approximately 100
to 125 preferred shareholders, who will be unaffiliated with PIMCO, and
private placement,
administrative, distribution and reporting services with respect to the
preferred shareholders
will be provided by a third party firm. Please supplementally explain how
the purchase by
preferred shareholders will be accomplished, the timing of any issuance of
the REIT
Subsidiary's preferred shares and any cost or other implication of such
offering for
shareholders of the Fund. If such offering will take place within one year
of the effective
date of the registration statement, please confirm that costs associated
with any offering and
any estimated dividend expense of the preferred shares will be reflected in
the fee table.
Also, please disclose who will pay the private placement, administrative,
distribution and
reporting expenses of the third party firm. We may have more comments after
reviewing
your response.
Prospectus Summary -- Principal Risk Factors -- Focused investment risk (page
40)
18. If the Fund's investments will be focused in any sector, issuer, asset
class, country or
geographic region, please add appropriate risk disclosure.
Summary of Fund Expenses (pages 41 - 42)
19. The fee table includes a "Fee Waiver and/or Expense Reimbursement" line
item. Please add
a footnote to this line item describing such fee waiver (including that the
fee waiver
agreement extends to not less than one year from the effective date of the
Fund's registration
statement) and confirm that the fee waiver agreement will be filed as an
exhibit to the
registration statement. Please also disclose any ability of the Adviser to
recoup waived
expenses and briefly describe the terms of recoupment. Please ensure that
the recoupment
period is limited to three years from the date of the waiver/reimbursement.
Management of the Fund -- Net Asset Value (pages 115 - 116)
20. The first sentence of this section states that investments for which market
quotes or market-
based valuations are not readily available are valued at fair value as
determined in good faith
by the Board or persons acting at their direction. As the Fund will invest
in real estate as part
of its principal strategies, please provide a more detailed description of
how real estate will
be fair valued.
Repurchase of Common Shares; Conversion to Open-End Fund (pages 122 - 123)
21. The sixth sentence of the first paragraph of this section states that the
Board may consider
open market repurchases and/or tender offers of the Fund's Common Shares.
Please tell us
whether there is a specific repurchase plan or tender offer plan currently
contemplated by the
Board. If so, please disclose the details of such plan. We may have more
comments after
reviewing your response.
Patrick Valenti, Esq.
Page 6
February 13, 2020
STATEMENT OF ADDITIONAL INFORMATION
Investment Restrictions -- Fundamental Investment Policies (pages 3 - 4)
22. Investment restriction no. (1) states that, for purposes of the
restriction, investment
companies are not considered to be part of any industry. Please note that
the Fund and the
Investment Manager may not ignore the investments of affiliated and
unaffiliated underlying
investment companies when determining whether the Fund is in compliance
with its
concentration policy. Please add disclosure to clarify that the Fund will
consider the
investments of underlying investment companies when determining compliance
with its
concentration policy.
23. Please confirm that the Fund will look through a private activity municipal
debt security
whose principal and interest payments are derived principally from the
assets and revenues of
a nongovernmental entity in order to determine the industry to which the
investment should
be allocated when determining the Fund's compliance with its concentration
policy.
24. On page 86, the seventh sentence of the third paragraph states that
mortgage-related assets or
ABS that are issued or guaranteed as to principal or interest by the U.S.
Government or its
agencies or instrumentalities are not subject to the Fund's industry
concentration policy.
Please remove the reference to "mortgage-related assets" from this sentence
as the Fund will
concentrate in real estate and mortgage-related investments issued by
government agencies
or other governmental entities or by private originators or issuers.
PART C OTHER INFORMATION
Item 25: Financial Statements and Exhibits
25. In Exhibits 2.a. and 2.b., please either remove the provisions in Sections
5 and 6 of the
Fund's Agreement and Declaration of Trust and Article 11 of the Fund's
Bylaws or revise
these provisions to clarify that they do not apply to claims made under the
federal securities
laws. See Section 14 of the Securities Act, Section 29(a) of the Securities
Exchange Act of
1934 and Section 47(a) of the 1940 Act (each of which states that any
condition or provision
waiving compliance with those Acts or Commission rules and regulations
shall be void).
26. Exhibit 2.s. (Power of Attorney) states that the exhibit will be filed by
amendment. Please
confirm that the Fund will also file a certified resolution of the Board if
the signature line of
the Fund is being signed pursuant to a power of attorney. See Rule 483(b)
under the
Securities Act.
GENERAL COMMENTS
27. Please tell us if you have presented any test the waters materials to
potential investors in
connection with this offering. If so, please provide us with copies of such
materials.
Patrick Valenti, Esq.
Page 7
February 13, 2020
28. We note that many portions of your filing are incomplete or to be updated
by amendment
(e.g., fee table, information regarding Trustees). We may have additional
comments on such
portions when you complete them in pre-effective amendments, on disclosures
made in
response to this letter, on information supplied supplementally, or on
exhibits added in any
pre-effective amendment.
29. If you intend to omit certain information from the form of prospectus
included with the
registration statement that is declared effective in reliance on Rule 430A
under the Securities
Act, please identify the omitted information to us supplementally,
preferably before filing the
pre-effective amendment.
30. Please advise us whether FINRA has approved the distribution terms and
arrangements of the
Fund's offering.
31. Please advise us if you have submitted or expect to submit any exemptive
applications or no-
action requests in connection with your registration statement.
32. Response to this letter should be in the form of a pre-effective amendment
filed pursuant to
Rule 472 under the Securities Act. Where no change will be made in the
filing in response to
a comment, please indicate this fact in a supplemental letter and briefly
state the basis for
your position.
In closing, we remind you that the Fund and its management are
responsible for the
accuracy and adequacy of their disclosures, notwithstanding any review,
comments, action or
absence of action by the staff.
* * * * *
If you have any questions prior to filing a pre-effective amendment,
please call me at
(202) 551-6782.
Sincerely,
/s/ Anu Dubey
Anu Dubey
Senior Counsel
cc: Michael Spratt
Michael Shaffer