An Actively-Managed “BOND” Fund for Income, Capital Appreciation

Treasury yields crept up higher in the waning days of last week’s trading session, but still not to levels where investors can simply rely on safe haven government debt for the highest-yielding income alternative. One way investors can get higher yields is via actively managed bond funds like the PIMCO Active Bond Exchange-Traded Fund (NYSEArca: BOND).

The fund is a diversified portfolio of high quality bonds that is actively managed, seeking current income and long-term capital appreciation, consistent with prudent investment management. BOND invests primarily in investment grade debt securities, and discloses all portfolio holdings on a daily basis.

The Fund will seek to maintain a fairly consistent level of dividend income, and generally seeks to manage capital gain distributions. However, there can be no assurance that a change in market conditions or other factors will not result in a significant change in the Fund’s distribution rate or that the rate will be sustainable in the future. With a primary benchmark of the Barclays U.S. Aggregate Index, the fund offers a core bond strategy that is designed to capitalize on opportunities across multiple sectors of the fixed income market.

“It’s a little bit more aggressive in some ways than the more basic version of the fund, but I would call it almost like a Pimco Income light, and Pimco Income, as you may or may not remember, is a much more aggressive version of Pimco offering in the sense of, it holds a lot of non-agency mortgages and things and it’s in our multi-sector category, which makes it quite a bit more aggressive than a regular core-plus fund,” said Morningstar senior analyst Eric Jacobson. “This one does qualify for core plus, but it’s got a little bit more freedom than a more basic fund and it’s interesting, and it’s had a good record so far. And the main thing is that we really like the managers and think that this is a very interesting offering.”

BOND chart

Top 10 exposures:

  1. U S TREASURY BOND: 5.20%
  2. FHLMC GOLD 30YR #V8-3421: 4.08%
  3. FHLMC GOLD 30YR GNT #G0-8788: 1.92%
  4. FNMA PASS THRU 30YR #MA3210: 1.82%
  5. FHLMC GOLD 30YR GNT #G0-8871: 1.81%
  6. FIN FUT US ULTRA 30YR CBT 12/19/19: 1.80%
  7. FHLMC GOLD 30YR GNT #G0-8766: 1.70%
  8. FHLMC GOLD 30YR GNT #G0-8779: 1.62%
  9. FHLMC GOLD 30YR #V8-4637: 1.48%
  10. FNMA PASS THRU 30YR #ZT1951: 1.47%

According to Morningstar numbers, the fund has been yielding 8.26% YTD.

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