Pimco Launches Active Foreign Currency ETF

By
February 12, 2013
Share:

Pimco gives investors a new multicurrency ETF designed to profit from a weakening dollar.

Pimco, the money management firm behind Bill Gross’ Pimco Total Return ETF (NYSEArca: BOND), today rolls out an actively managed nondollar currency ETF that will seek out any number of currencies—including those from emerging market countries—that the manager thinks have a good chance of outperforming the dollar over the long term.

The Pimco Foreign Currency Strategy Exchange-Traded Fund (NYSEArca: FORX) will invest in a combination of short-term fixed-income instruments, money market securities and currency forwards backed by high-quality, low-duration securities. It comes with an annual expense ratio of 0.65 percent, including a 0.11 percent fee waiver, according to regulatory paperwork detailing the ETF.

While the elongated angst-ridden period following the 2008 market collapse has tended to help the dollar in global investment markets, as the greenback has played a flight-to-safety role, many predict that the U.S. currency will resume its secular slide against a variety of currencies as the global economy slowly normalizes and the “Great Recession” fades into memory.

The new fund joins other multicurrency strategies already on the market, notably two ETFs from WisdomTree—the WisdomTree Commodity Currency Fund (NYSEArca: CCX) and the WisdomTree Emerging Currency Fund (NYSEArca: CEW). Crucially, however, because FORX is active, it can cast a much wider or narrower net than the two WisdomTree funds.

Pimco said it will select the fund's country and currency composition based on its evaluation of relative interest rates, inflation rates, exchange rates, monetary and fiscal policies, trade and current account balances, legal and political developments and other specific factors it believes to be relevant.

FORX will be able to invest in investment-grade securities as well as high-yield securities or, if unrated, of comparable quality as determined by Pimco. The duration of the securities will be anywhere between zero and three years, the Newport Beach, Calif.-based company said in a summary prospectus.

The ETF will normally invest at least 80 percent of its assets in the currency-related securities, and will typically limit its exposure to a single non-U.S. currency—from currency holdings or investments in securities denominated in that currency—to 20 percent of its total assets.

FORX will also be able to buy or sell securities on a when-issued, delayed delivery or forward commitment basis, and may engage in short sales.

Bill Gross’ BOND is the most successful actively managed ETF to date. Launched on March 1, 2012, it now has more than $4 billion in assets.

 

ETF.COM CHANNELS

Trying to figure out alternatives ETFs? Use our alternatives ETFs channel, library and ETF screener!

Want to learn more about smart-beta ETFs? Check out our smart-beta guide, essentials library and ETF screener!

ETF DAILY DATA

'VWO' topped redemptions Tuesday, Sept. 1, as investors continued to trim exposure to international stock ETFs, particularly emerging market funds.

'SPY' and 'MDY' paced State Street's issuer-leading asset gains Tuesday, Sept. 1. Total U.S.-listed ETF assets slipped below $2 trillion.

ETF.COM ANALYST BLOGS

By Dave Nadig

With many ETFs currently trading well off fair value, what’s an ETF investor to do? Don’t panic.

By Matt Hougan

Out-of-favor funds can bring attractive returns.

By Matt Hougan

New data from Charles Schwab show that the death of mutual funds is happening faster than we thought.

By Dave Nadig

Grab the popcorn. Precidian just doubled-down on its nontransparent active ETF proposal with the SEC this morning.

ETF INDUSTRY PERSPECTIVE

By John Del Vecchio

An index that goes long financially sound companies and shorts the ones with problematic balance sheets.

By Dan Draper

The nature of retirement is changing. How can investors adapt?

By Invesco PowerShares

A more in-depth look at the smart-beta survey's results.