PIMCO Files For First Mutual Fund to ETF Conversion

PIMCO is the latest firm to utilize a conversion from a mutual fund to add to its ETF lineup.

Pacific Investment Management Co., the bond and asset management giant known as Pimco, filed its first proposal to convert a mutual fund to an ETF as demand for the cheaper, more liquid exchange-traded fund vehicle supersedes that of traditional mutual funds.

If approved by the Securities and Exchange Commission, the $140 million Mortgage-Backed Securities Fund will convert into an ETF by Sept. 20, according to Pimco’s March 1 filing. Newport Beach, California-based Pimco wrote in the filing that certain retirement accounts can't hold the ETF, and in those plans the investments will be transferred to the PIMCO Government Money Market Fund. The filing also said the conversion would offer tax benefits to investors. 

ETFs have been gaining assets at the expense of mutual funds for years, as investors increasingly prefer the tax, cost and liquidity benefits of ETFs. Over $60 billion in assets have been converted from mutual funds to ETFs since the first conversion in 2021 and the U.S. ETF industry's assets have surged to $11.6 trillion in part by pulling money from traditional mutual funds.

Pimco manages $27.2 billion in 50 ETFs. A spokesperson said the conversion would create the company's first ETF with a "mortgage-focused strategy.” 

ETFs Gain Assets

Firms such as Fidelity Investments, J.P. Morgan Asset Management, and TCW Group have converted multiple mutual funds to ETFs. Other asset managers such as Morgan Stanley and Dimensional Fund Advisors are seeking exemptive relief to issue ETF share classes of mutual funds, a move that will be a highly anticipated regulatory decision that could unleash up to billions in assets into ETFs if approved by the SEC.

The largest Pimco ETF is the PIMCO Enhanced Short Maturity Active ETF (MINT), which has nearly $11 billion under management.

Contact Lucy Brewster at [email protected].