ETF Spotlight: Investment Grade Corporate Debt
July 27th 2012 at 12:00pm by Tom Lydon
ETF spotlight on the PIMCO Investment Grade Corporate Bond Index Fund (NYSEArca: CORP), part of an ongoing series.
Assets: $274.0 million
Objective: The Investment Grade Corporate Bond Index Fund tries to reflect the performance of the BofA Merrill Lynch U.S. Corporate Index, which holds investment grade corporate debt.
Holdings: Top holdings include: Repo 4.0%, Repo 1.6%, JPMorgan Chase & Co. SR Unsec 1.5%, AT&T Inc. Glbl NT 1.2% and Verizon Comm Glbl SR Unsec 1.2%.
What You Should Know:
- Pacific Investment Management Company sponsors the fund.
- CORP has an expense ratio of 0.20%.
- The fund has 245 holdings and the top 10 make up 14.2% of the overall portfolio.
- Maturity distributions include: 0-1 years 3%, 1-3 years 18%, 3-5 years 12%, 5-10 years 47%, 10-20 years 1% and 20+ years 19%.
- Bond holdings have an average effective maturity of 9.79 years and an average effective duration of 6.51 years.
- Country allocations include: U.S. 73.6%, U.k. 5.5%, Canada 3.2%, Australia 2.1%, Netherlands 1.7%, Switzerland 1.6%, Japan 1.5%, Brazil 1.4%, Germany 1.3%, Mexico 1.2%, Russia 1.0%, Belgium 0.9%, France 0.7%, Hong Kong 0.7%, Sweden 0.6%, Luxembourg 0.6%, Peru 0.3%, Spain 0.2%, Italy 0.1% and Norway 0.1%.
- S&P credit ratings include: AAA 0.7%, AA+ 1.8%, AA 4.1%, AA- 5.5%, A+ 9.5%, A 14.6%, A- 20.5%, BBB+ 12.1%, BBB 15%, BBB- 5.4% and BB+ 2.6%.
- CORP has 30-day SEC yield of 2.61%.
- The fund is up 2.5% over the past month, up 4.2% over the three months and up 9.2% year-to-date.
- The ETF is 2.1% above its 200-day exponential moving average.
- “Investors holding this fund are generally looking for a relatively safe and consistent income stream,” according to Morningstar analyst Timothy Strauts. “The other reason to own this fund is that you think that the medium-term corporate-bond market is generally underpriced and that you expect bonds to appreciate in value.”
- “Like all bond funds in general, this ETF is subject to inflation and interest-rate risk,” Strauts added. “As inflation rises, the value of the underlying bonds will most likely decline. The same is true if the real risk-free rate of return demanded by investors increases.”
The Latest News:
- BlackRock, Glenmede and four other firms that collectively managed over $4 trillion in assets are fueling the rally in bonds as they move more money into corporate bonds, Bloomberg reports.
- The Bank of America Merrill Lynch Global Broad Market Corporate Index is set to gain 3.6% in July, the highest increase since the index’s inception in 1997.
- “People are saying the economy is sluggish, but it’s not so bad that companies are going to start defaulting left and right and getting downgraded severely because they’ve got a lot of cash and have funded out their debt maturities,” Martin Fridson, a global credit strategist at BNP Paribas Investment Partners, said in the article.
PIMCO Investment Grade Corporate Bond Index Fund
For past stories in this series, visit our ETF Spotlight category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.