Eric Dutram: There are several factors that influence the decision of selecting an ETF for investment. Such factors include the past performance, holdings, sector exposure and concentration. Beyond these examples, expenses can also play an important role in the decision making process as well. Read more…
Pimco’s launch should be a big wake-up call to ETF investors.
Has anyone noticed that Pimco, as of yesterday, is offering (now higher-yielding, lower-priced) short-term U.S. Treasuries at an expense ratio of 9 bps (0.09%)? Hougan notes that the new fund (NYSE Arca: TUZ) traded 300,000 shares on its first day, and I expect it’ll be trading a lot more than that. Pimco’s got BRAND in fixed income, and the forthcoming launch of six more ETFs (along with all sorts of other plans) indicates that it is just dipping its toes in the ETF market so far … and is planning to jump into the pool in a big way (liquidity, transparency). Read more…
Currently, the largest direct competitor for TUZ is theiShares Lehman 1-3 Year Treasury Bond ETF (NYSE Arca: SHY), which has $7billion in assets and charges management fees of 0.15%. If TUZ can attract sufficient liquidity tosupport low-cost trading, it will be a serious challenger to SHY.
In related news, PIMCO also filed papers with the Securitiesand Exchange Commission to launch six additional fixed-income ETFs:
• PIMCO 3-7 Year U.S. Treasury Index Fund
• PIMCO 7-15 Year U.S. Treasury Index Fund
• PIMCO 15+ Year U.S. Treasury Index Fund
• PIMCO Broad U.S. TIPS Index Fund
• PIMCO Short Maturity U.S. TIPS Index Fund
• PIMCO Long Maturity U.S. TIPS Index Fund
PIMCO ETF WEBSITE: http://www.pimcoetfs.com/
PIMCO is the leader in fixed-income management, so it’s fitting that their first offering is the PIMCO 1-3 Year U.S. Treasury Index Fund (TUZ), which focuses on low-yielding short-term Treasuries. The launch is especially exciting, because it’s going to go head-to-head with the grandfather of Treasury ETFs, iShares Barclays 1-3 Year Treasury Bond (SHY).
PIMCO recognizes that competition is fierce, but they are also sensitive to the fact that current yields are close to historic lows. To lure those looking for a strong fixed-income brand name at a reasonable price, the fund will have a 0.09% expense ratio after waiving a portion of the fees for at least a year. That’s less than any other bond ETF tracked by Morningstar, notes Ian Salisbury for The Wall Street Journal. SHY’s expense ratio is 0.15%.