PIMCO Unveils Active Muni Income ETF

PIMCO Unveils Active Muni Income ETF

The new fund's mandate allows for investments in private activity bonds. 

Reviewed by: Heather Bell
Edited by: Heather Bell

Today, PIMCO rolled out another actively managed fixed income ETF targeting the municipal bond space. However, the PIMCO Municipal Income Opportunities Active ETF (MINO) is notable because it mentions an income focus in its name, while the firm’s existing muni ETFs are more focused on duration.

MINO comes with an expense ratio of 0.39% and lists on the NYSE Arca.

The new product joins the $670 million PIMCO Intermediate Municipal Bond Active ETF (MUNI) and the $546 million PIMCO Short Term Municipal Bond Active ETF (SMMU), which are both actively managed as well.

While MUNI and SMMU are both focused on investment-grade municipal bonds, MINO can invest up to 30% of its assets in junk debt. However, there are no limits on how much the fund can invest in investment-grade securities or in private activity bonds.

The latter are designed to allow municipalities to borrow money on behalf of private companies or nonprofit organizations for mostly private ventures that have at least some public benefit such as airports or hospitals. Indeed, the prospectus notes that the fund could have significant investments in certain projects that could involve “finance education, health care, housing, transportation, utilities and other similar projects.” Importantly, private activity municipal bonds can be subject to federal taxes, which is not the case with governmental municipal bonds.

MINO will target an average portfolio duration within two years of that of the Bloomberg Barclays Municipal Bond Index, which was at 5.96 years as of the end of June. The fund is focused on capturing current income, and its management team aims to invest in bonds that are competitively priced and offering sustained above-average yields, according to the prospectus.

The addition of MINO to its lineup gives PIMCO with 17 ETFs, with assets under management totaling more than $26 billion.   

Contact Heather Bell at [email protected]

Heather Bell is a former managing editor of etf.com. She has also held editorial positions at Dow Jones Indexes and Lehman Brothers. Bell is a graduate of Dartmouth college and resides in the Denver area with her two dogs.