PIMCO is shuttering three of its exchange traded funds, including two that track U.S. Treasuries and one that follows a foreign currency strategy.
According to PIMCO, the PIMCO 3-7 Year U.S. Treasury Index Exchange-Traded Fund (NYSEArca: FIVZ), PIMCO 7-15 Year U.S. Treasury Index Fund (NYSEArca: TENZ) and PIMCO Foreign Currency Strategy ETF (NYSEArca: FORX) are on the chopping block.
FIVZ has $9.3 million in assets under management and was launched in 2009. TENZ has $20.3 million in AUM and was launched in 2009. FORX has $14.3 million in AUM and was launched in 2013.
FIVZ tries to track Treasury bonds around the 5-year bellwether, with an effective duration of 4.43 years, TENZ focused on more mid-term maturities, with an effective duration of 7.87 years.
FORX aims to provide exposure to foreign currencies, and according to PIMCO, the fund “is likely to benefit if the U.S. dollar depreciates.” However, the USD is currently in a strengthening cycle and will likely continue to appreciate as foreign central banks implement loose monetary policies and the Federal Reserve thinks about hiking rates.
The liquidation of the three funds will be on September 30, 2015. The last day of trading on NYSE Arca for each liquidating fund is expected to be September 23, 2015, so the three funds will not be able to accept orders for purchase of creation units and there will be no guarantee that investors will find a market for purchase or sale of fund shares after the 23rd.
In the event a firm shutters an ETF, investors have one of two choices: sell your position before the final trading date, or wait for the fund to close and the check to come in. This can create tax consequences, and no investor likes surprises. [New ETFs: Too Much too Soon?]