PIMCO Launches Active TIPS ETF (ILB)

ETF Database

PIMCO, fresh off the extremely successful launch of its Total Return ETF (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 (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 (WIP) holds a broad-based portfolio with a tilt towards Western Europe, while the iShares Global Inflation-Linked Bond Fund (GTIP) includes both domestic and international holdings. 

TIPS ETFs

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 (LTPZ) and short (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 (SCHP) charging just 0.14% annually [download How To Pick The Right ETF Every Time with a free ETFdb membership]. 

Disclosure: No positions at time of writing. 

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