PIMCO Launches Active TIPS ETF (ILB, GTIP, WIP, BOND, LTPZ, STPZ, SCHP)
Michael Johnston: PIMCO, fresh off the extremely successful launch of its Total Return ETF (NYSEARCA:BOND), has rolled out another actively managed bond fund that taps into a corner of the fixed income market that has generated significant interest in recent years. The new Global Advantage Inflation-Linked Bond Strategy Fund (NYSEARCA:ILB) will be comprised of inflation-protected bonds, securities that are designed to appreciate along with official inflation metrics.
The new PIMCO ETF will be benchmarked against the PIMCO Global Advantage Inflation-Linked Bond Index, and will invest in inflation-protected bonds that are ‘economically tied to at least three developed and emerging market countries (one of which may be the United States)” according to the prospectus. While most inflation-protected bond ETFs focus primarily on U.S. securities, there are a handful that maintain an international focus. The SPDR DB International Government Inflation-Protected Bond ETF (NYSEARCA:WIP) holds a broad-based portfolio with a tilt towards Western Europe, while the iShares Global Inflation-Linked Bond Fund (NYSEARCA:GTIP) includes both domestic and international holdings.
Though there are more than a dozen ETFs in the Inflation-Protected Bonds ETFdb Category, IHB is the first actively managed ETF to tap into this corner of the bond market. PIMCO already offers three index-based TIPS ETFs as part of its product lineup, including the broad-based TIPZ. In addition, PIMCO offers products that focus on both the long (NYSEARCA:LTPZ) and short (NYSEARCA:STPZ) ends of the duration spectrum [see the Hyper-Inflation ETFdb Portfolio ].
STPZ, which debuted in 2009, has already attracted about $1 billion in assets. In total, the three PIMCO TIPS ETFs have aggregate assets of nearly $1.5 billion. In total inflation-protected bond ETFs have aggregate assets approaching $25 billion, highlighting the tremendous interest in accessing this asset class through the exchange-traded structure. The bulk of that $25 billion is in the ultra-popular TIP, which is one of the largest ETFs by total assets with some $22 billion.
ILB will charge 0.60%, which puts it at the high end of the expense spectrum for inflation-protected bond ETFs. The average for the ETFdb Category is about 28 basis points, with the Schwab U.S. TIPS ETF (NYSEARCA:SCHP) charging just 0.14% annually [download How To Pick The Right ETF Every Time with a free ETFdb membership].
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