Pimco plans five actively managed fixed-income ETFs spanning the unverse of floating-rate, low-duration, senior-loan and mortgage-backed bonds, hoping investors will want strategies that will help dampen interest-rate volatility and provide exposure to a recovering housing market.
The proposed ETFs, and respective registration statements are as follows:
Pimco Investment Grade Floating Rate Bond Active Exchange-Traded Fund
Pimco Low Duration Investment Grade Corporate Bond Active Exchange-Traded Fund
Pimco Mortgage Backed Securities Active Exchange-Traded Fund
Pimco Senior Loan Active Exchange-Traded Fund
Pimco Commercial Mortgage Backed Securities Active Exchange-Traded Fund
Floating-rate bond ETFs have been popular in the past few years as investors have begun to prepare for a normalization of interest rates. The yields on such securities adjust with the prevailing trend, giving investors interest-rate risk protection. Investors continue to show interest in these strategies in 2014 in anticipation of the Federal Reserve raising rates sooner rather than later in 2015.
For example, the $7.2 billion PowerShares Senior Loan Portfolio (BKLN) and the $3.5 billion iShares Floating Rate Fund ETF (FLOT | B-99) raked in $5 billion and $3.2 billion, respectively, in 2013, according to ETF.com Analytics data.
In the case of senior loans, what sets them apart is that they have a right to payment before most other debts that a borrower has, meaning senior loans have higher recovery rates than other below-investment-grade debt should a company default on its debts.
Pimco is also betting on the turnaround in the real estate market, with existing home sales inching higher and continuing appreciation in housing prices six years after a burst in the housing bubble helped sparked a deep recession in 2008.
Fees and associated tickers were not available in the filings.
WisdomTree has put into registration an ETF focusing on the emerging markets called the WisdomTree Emerging Markets ex-State-Owned Enterprises Fund, which will filter out all state-owned companies from its portfolio.
The fund is the latest in a number of newly launched or proposed ETFs that are looking to give investors exposure to a niche segment within the broader markets to fine-tune exposure at a time of choppiness in global equity markets this year.
The fund’s index defines state-owned enterprises as companies with more than 20 percent government or government entity ownership, according to the filing. Associated fees and tickers were not made available in the filing.