Pimco, the world’s biggest bond fund manager, said today it has received regulatory approval on its plans to roll out ETF versions of three of its fixed-income mutual funds, much as it did with Bill Gross’ Total Return Fund, suggesting launch is near.
The Pimco Diversified Income ETF, the Pimco Real Return ETF and the Pimco Low Duration ETF will look to replicate the success of the Pimco Total Return ETF (NYSEArca: BOND) since it was rolled out in an ETF wrapper in March 2012.
BOND was the most successful ETF launch of last year and is the second-most successful ETF launch of all time, gathering more than $1 billion in its first three months. The SPDR Gold Shares (NYSEArca: GLD) gathered its first $1 billion in three days. BOND now has more than $4.72 billion in assets.
The three new ETFs, first put in registration in June 2012, amount to Pimco’s effort to remarket its most successful actively managed funds in ETF wrappers. The three funds the Newport Beach, Calif.-based firm wants to launch in ETF wrappers, and their existing assets are:
- Pimco Real Return Fund (PRTNX), $24.88 billion
- Pimco Low-Duration Fund (PTLAX), $23.70 billion
- Pimco Diversified Income Fund (PDVAX), $7.32 billion
The Funds In Detail
The Diversified Income strategy, which comes with a net annual expense ratio of 0.85 percent, will comprise debt securities from U.S. and non-U.S. issuers, both public and private.
“The proportion of the fund’s assets committed to an individual investment, or investments with particular characteristics, varies based on PIMCO’s outlook for the U.S. economy and the economies of other countries in the world, the financial markets and other factors,” the company said in the most recent filing.
“PIMCO attempts to identify areas of the bond market that are undervalued relative to the rest of the market,” it added.
The fund will be managed by Pimco’s founder and Co-CIO Bill Gross and Curtis Mewbourne, according to the filing.
The Pimco Low-Duration Exchange Traded Fund has a net annual expense ratio of 0.55 percent, and will be co-managed by Gross, who heads the mutual fund version of the portfolio, PTLAX, and by Marc Seidner, a managing director at Pimco.
The fund will have portfolio duration of one to three years depending on Pimco’s forecast for interest rates—duration measures a security’s sensitivity to interest rate changes. The fund will own primarily investment-grade debt.
The Pimco Real Return Exchange Traded Fund, the ETF version of PRTNX, will cost a net of 0.55 percent a year, and be managed by Gross and Mihir Worah. The ETF will own primarily inflation-indexed bonds of varying maturities issues by U.S. and non-U.S. governments.
Inflation-indexed bonds are fixed-income securities designed to protect investors against inflation. Real return, in this case, amounts to total return less the cost of inflation, as determined by the change in an official inflation measure, the filing said.
BOND has an annual expense ratio of 0.55 percent.
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