How PIMCO Will Structure Its Total-Return ETF

By Ron DeLegge

May 02, 2011 at 10:09 PM

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PIMCO has filed a request with the U.S. Securities and Exchange Commission to launch the PIMCO Total Return Exchange-Traded Fund, an actively managed fund that is similar to the PIMCO Total Return mutual fund (PTRRX).

After launching actively managed ETFs, such as the PIMCO Build America Bond Strategy Fund (NYSEArca: BABZ) and the PIMCO Enhanced Short Maturity Strategy Fund (NYSEArca: MINT), PIMCO will be adding the "Total Return" strategy to the fund family. The new ETF will seek the maximum total return for income earned from the fund's investment and capital appreciation.

The PIMCO Total Return ETF strategy and performance results will differ from the PIMCO Total Return Mutual Fund, which was launched back in 1986 and is one of the most successful fixed-income funds in the world.

The new ETF will target 65% of fixed-income securities including bonds, debt securities, and similar instruments issued by U.S and non-U.S public or private sector companies. The fund may also invest up to 15% of its total assets in securities and instruments that are economically tied to emerging market countries, up to 10% of its total assets in preferred stock, convertible securities, and other equity related securities, along with mortgage or asset-backed securities without limitation.

The new ETF is considered a hedge fund with mutual fund packaging. PIMCO's track record combined with the advantageous structure of an ETF is likely to attract attention and assets. The launch date and expense ratio for this ETF have yet to be announced.

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