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PIMCO Readies 3 More Bond ETFs

Tom Lydon

By Tom Lydon:

PIMCO has received regulatory approval to launch exchange traded fund adaptations of three mutual funds, similar to its highly successful PIMCO Total Return ETF (BOND - News).

The actively managed PIMCO Diversified Income Exchange-Traded Fund (:DI), PIMCO Real Return Exchange-Traded Fund (no ticker provided) and PIMCO Low Duration Exchange-Traded Fund (:LDUR) registrations went through Monday, but no launch date has been scheduled, according to an emailed note.

The three new offerings would help PIMCO market three mutual fund strategies in an ETF wrapper, including:

  • PIMCO Real Return Fund (:PRRIX): 2.31% 30-day SEC yield
  • PIMCO Low-Duration Fund (:PTLDX): 1.27% 30-day SEC yield
  • PIMCO Diversified Income Fund (:PDIIX): 3.04% 30-day SEC yield

"The investments made by the ETFs and the results achieved by the ETFs at any given time are not expected to be the same as those made by other funds for which PIMCO acts as investment adviser, including funds with names, investment objectives and policies similar to the newly filed ETFs," a PIMCO spokesman told Barron's. The funds are "not intended to be clones of those funds in an ETF vehicle," he said.

According to the most recent filing, the Diversified Income ETF will try to generate maximum total return through fixed-income assets, such as bonds, debt securities and other similar instruments issued by U.S. and non-U.S. public- or private-sectors with varying maturities. The diversified income fund has an average portfolio duration of between three to eight years, based on interest rate forecasts. DI will have an 0.85% expense ratio.

Duration is used to measure a bond's price to sensitivity to changes in interest rates - changes in interest rates will have a greater effect on long duration bonds.

The Real Return ETF will try to generate maximum total return through inflation-indexed bonds of varying maturities issued by the U.S. and non-U.S. governments, their agencies and corporations. Inflation-indexed bonds are structured to provide protection against inflation. The holdings' duration will be within plus or minus three years of the Barclays U.S. TIPS Index, which has a duration of around 6.2 years. The ETF has a 0.55% expense ratio.

The Low-Duration ETF will try to generate maximum total return through a diversified portfolio of fixed income instruments of varying maturities, including bonds, debt securities and other similar instruments issued by various U.S. and non-U.S. public- or private-sectors. However, the portfolio's average duration varies from one to three years, based on interest rates. LDUR has a 0.55% expense ratio.

The Funds' portfolio are jointly managed by Bill Gross, Co-Chief Investment Officer and a founding partner of PIMCO, and Curtis Mewbourne, Managing Director of PIMCO.

Max Chen contributed to this article.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.