PIMCO Files For More Active ETFs [Vanguard Total Bond Market ETF, IQ Hedge Multi-Strategy Tracker (ETF)]

PIMCO Income ETF in Focus

This fund aims to maximize current income by investing in a broad array of fixed income sectors globally and provides long-term capital appreciation. The average duration of the fund would range from 0–8 years.

The direct competitor of this fund could be the newly launched RiverFront Strategic Income Fund (RIGS) that has been able to attract $173.4 million in its asset base since its debut in October 2013 (read: New Income ETF Launches: RiverFront Strategic Income Fund).

PIMCO Unconstrained Bond ETF in Focus

This fund looks to provide exposure to a variety of fixed income securities with varying maturities in both investment-grade and high yield securities (junk bonds). However, the high yield securities investment is restricted to 40% of the total assets as per the filing. Further, exposure to foreign debt is also limited to 35%.

The product would likely face tough competition from Vanguard Total Bond Market ETF (BND) that has about $17.7 billion in AUM and targets intermediate yield of the curve with duration of 5.5 years.

The second competitor could be Vanguard Short-Term Bond ETF (BSV) that has an average duration of 2.7 years and manages assets of nearly $14 billion. Both funds charge 10 bps in fees a year from investors.

PIMCO Stocks Plus Absolute Return Strategy ETF in Focus

This fund looks to beat the total return of the S&P 500 Index using bonds and equity derivatives. According to the filing, the fund manager would utilize an absolute return approach for managing the bonds securities and gain long exposure in the S&P 500 Index derivatives instead of the S&P 500 Index stocks (read: 3 Niche ETFs That Will Keep Flying).

Though the fund does not have a direct competitor, a funds like the IQ Hedge Multi-Strategy Tracker ETF (QAI) might provide stiff competition to the absolute return strategy.

PIMCO Commodities Plus AR Strategy ETF in Focus

This fund looks to beat the total return of the Credit Suisse Commodity Benchmark using bonds and commodity derivatives. According to the filing, the fund manager would utilize an absolute return approach for managing the fixed income securities and gain exposure to the commodity futures markets through commodity-linked derivative instruments including commodity index-linked notes, swap agreements, commodity options and futures contracts.

Currently, there is no direct competitor for this fund.

Bottom Line

Given the volatility in both the equity and bond markets, it is difficult to say how the proposed funds from PIMCO will be received by investors should they pass regulatory hurdles. However, if they do pass the regulatory hurdles and are then able to show some outperformance compared to broad indexes, they might receive some interest from investors who like an active approach in relatively unique markets.

This article is brought to you courtesy of Eric Dutram.

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