Pimco Sets Cap Gains On 14 Of 19 ETFs

December 28, 2012

Pimco’s cap gains payouts no surprise given rising bond markets in 2012.


Pimco, the bond fund manager behind Bill Gross’ blockbuster Pimco Total Return ETF (NYSEArca: BOND), declared 2012 capital gains distributions on 14 of its 19 ETFs, an unsurprising turn of events given the popularity of bond funds in the past year of on-again/off-again market volatility.

Indeed, ETF sponsors have generally been reporting cap gains distributions on bond funds rather than equities funds, and because Newport Beach, Calif.-based Pimco sponsors only bond funds, the fact that almost three-quarters of its ETFs have payouts is consistent with the broader pattern.

That pattern essentially reflects the post-crisis environment that has featured investors piling into fixed income in one-way traffic that has limited many managers’ ability to offset cap gains through sales of readily available low-cost-basis securities at the portfolio level. The challenge is rendered more difficult because bonds—unlike stocks—mature, forcing fund managers to realize gains at that time.

Among the sponsors who have reported a concentration, most—if not all—of their cap gains distributions on bond funds are on funds from iShares, State Street Global Advisors, Vanguard and Guggenheim.

Included among the bond funds with capital gains distributions is BOND, the nearly $4 billion ETF that came to market on March 1. The total payout of $0.88264 per share amounts to just shy of 1 percent of the ETF’s closing price on Dec. 27.

Details on the Pimco payouts are in the table on the following page.

Modest Cap Gains For Equities

By comparison, cap gains payouts on equities are much less frequent than on bond funds, and tend to be a smaller percentage of a given fund’s net asset value. Equity fund managers have been able to easily find securities to sell out of a portfolio to minimize and most often neutralize the need to pass on any capital gains to fund holders.

As an example, last year, only 20 of 756 equity ETFs paid distributions—less than 3 percent of all equity ETFs, and the gains they did pay out were tiny, according to data compiled by IndexUniverse. This year is looking to be similar.

Morningstar data meanwhile showed that 24 percent of equity mutual fund share classes made a capital gains distribution last year, and nearly two-thirds of these share classes distributed more than 2.0 percent of their assets as capital gains.

The payouts on the 14 Pimco bond ETFs, again, are detailed on the following page.

Regarding the table, while not currently complete, IndexUniverse intends to compile information on the entire universe of U.S.-listed ETFs and ETNs. It currently includes payout information on about three-quarters of the more than 1,400 U.S.-listed exchange-traded products.


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