With all the attention bestowed upon it in recent weeks, novices may get the impression that the PIMCO Total Return ETF (NYSEArca: BOND) is the only exchange traded fund sponsored by the California-based bond house.
Of course, that is far from true. PIMCO issues 16 other ETFs in addition to BOND. Some of those other PIMCO ETFs, including the PIMCO Enhanced Short Maturity ETF (NYSEArca: MINT) and the PIMCO 25+ Year Zero Coupon U.S. Treasury Index Fund (NYSEArca: ZROZ) have proven rather successful. [A Star Among PIMCO ETFs]
MINT, managed by Jerome Schneider, is the largest actively managed ETF while only two non-leveraged ETFs have offered better year-to-date performances than ZROZ.
Add the PIMCO Low Duration Exchange-Traded Fund (NYSEArca: LDUR) to the list of PIMCO ETF successes. LDUR, also managed by Schneider, debuted in January and already has $140.3 million in assets under management, a total surpassed by just eight other new ETFs. [Another Good Year for New ETFs]
“Despite the upheaval at PIMCO, we see no cause for concern with LDUR, as Schneider has been and continues to be the manager of the ETF, which aims for an average portfolio duration of one to three years based on PIMCO’s forecast for interest rates,” said Morningstar analyst Robert Goldsborough in a new research note.
Although 10-year Treasury yields have plummeted this year, a move that has stoked billions of inflows to bond ETFs focusing on the longer end of the yield curve, LDUR’s timing could prove to be sound. Arguably , it already has when considering that many investors have not been shy about allocating to shorter duration fixed income ETFs in preparation of a 2015 interest rate hike by the Federal Reserve.
With an effective duration of just 1.75 years, LDUR certainly delivers on the low duration promise. The rub there is a 30-day SEC yield of just 1.31%, or nearly 100 basis points below 10-year Treasuries, but the good news there is LDUR is not risky from a credit profile perspective.
Although 54% of the ETF’s weight is allocated to U.S. corporates with another 8% devoted to emerging markets debt, over 37% of LDUR’s holdings are rated at least BBB.
” To sweeten the pot for potential investors, PIMCO late last month cut the fee for LDUR to 0.49% from 0.57%,” according to Goldsborough.
LDUR is an ETF adaptation of the PIMCO Low-Duration Fund Institutional (PTLDX). PTLDX has generated an average annualized return of 4.6% over the past 15-years, 3.9% over the past 10-years and 5.0% over the past five-years.
PIMCO Low Duration ETF
