PIMCO, the California-based ETF and mutual fund issuer, appears to be on a roll and is seeking to triple its active ETF roster by offering variations for the popular mutual funds not only in the fixed income world, but also in the broad space – including equities and commodities.
The issuer launched two active ETFs –PIMCO Diversified Income ETF (DI) and PIMCO Low Duration ETF (LDUR) – on January 23 and is keeping up the momentum with its latest SEC filing. In the document, the company revealed plans for six more ETFs; four targeting various corners of the fixed income world, one targeting equities, and the other aiming at the commodity space.
While a great deal of the key information – such as expense ratios or ticker symbols– was not available in the initial release, other important points were available in the filing. We have highlighted those below for investors, who might be looking for a new play from PIMCO in a number of markets should the proposed products pass regulatory hurdles:
PIMCO Municipal Bond ETF in Focus
This fund looks to offer higher returns by investing in municipal debt securities, which are exempt from federal income tax. The average duration of the fund would range from 3–12 years (read: Three Municipal Bond ETFs for 2014).
According to the filing, the ETF will put about 20% of its assets in U.S. government securities, money market instruments or private activity bonds. About 50% of the portfolio is evenly split between California and New York bonds, and the municipal bonds that finance education, health care, housing, transportation, utilities and other similar projects. Industrial development bonds would take the remaining share in the basket.
This new fund looks to face stiff competition from Market Vectors-Intermediate Municipal Index ETF (ITM), which has amassed $575.1 million in AUM and has a modified duration of 7.46 years. ITM charges 24 bps in annual fees from investors.
PIMCO Foreign Bond ETF (U.S. Dollar-Hedged) In Focus
This fund seeks to provide maximum total return, consistent with preservation of capital and prudent investment management. The product looks to target the short end of the yield curve with average duration of within three years.
As per the filing, the ETF looks to invest in a variety of foreign bonds selected on a number of factors including interest rates, exchange rates, monetary and fiscal policies, trade and current account balances.
With respect to competition, Vanguard Total International Bond ETF (BNDX) would threaten the success of the proposed fund as it has managed assets of nearly $863.1 million. Average duration of BNDX is 6.6 years and expense ratio came in at 0.20%.