On this episode of the “ETF of the Week” podcast, VettaFi’s Head of Research Todd Rosenbluth discussed the PIMCO Multisector Bond Active ETF (PYLD) with Chuck Jaffe of “Money Life.” The pair talked about several topics regarding the fund to give investors a deeper understanding of the ETF overall.
PIMCO Multisector Bond Active ETF (PYLD)
Chuck Jaffe: One fund on point for today. The expert to talk about it. Welcome to the ETF of the Week, where we examine trending, new, newsworthy, unique, and intriguing exchange traded funds with Todd Rosenbluth, the head of research at VettaFi. And at VettaFi.com, you’ll find all the tools and research you need to be a savvy and smart investor in ETFs.
Todd Rosenbluth, it’s great to chat with you again.
Todd Rosenbluth: My pleasure, Chuck.
Chuck Jaffe: Your ETF of the Week is …
Todd Rosenbluth: The PIMCO Multisector Bond Active ETF (PYLD).
Chuck Jaffe: PYLD, the PIMCO Multisector Bond Active ETF. Now, this is a fund not quite a year old. The inception date was June of last year. Pimco basically created the active bond ETF space. Why this new fund with Pimco, and why now?
Todd Rosenbluth: So, we are right now heading into the the Federal Reserve meeting, as you and I are talking. By the time people are hearing this, we will now know that the Fed has likely kept rates exactly where they were. And they indicated there’s probably going to be fewer rate cuts than the market has been expecting. We think this is a great time for an actively managed bond ETF.
This Pimco product is actively managed by an experienced team, and they can go anywhere. You get to take advantage of Pimco’s top-down expertise and securities selection. It’s now available. We’ll dive into who’s running this fund and their process in a moment. But we’re really excited about this fund.
Chuck Jaffe: If the ETF world were a meritocracy, about half of the funds would go away. And admittedly, we’re still building out active. But with Pimco, with its deep bench and its well-established bond chops, why did they need another bond fund to differentiate from other things? And why would I want this one instead of their other ones that are more established?
Todd Rosenbluth: You’re right. Pimco has been a pioneer within the actively managed fixed income marketplace. They’ve got products that are focused on the ultra-short space. So with MINT, they have a product that’s more total return or core bond oriented, by the ticker BOND.
This newer ETF — PYLD — is different. It takes on a little bit more risk in seeking income. And we believe that that’s what’s warranted in this kind of environment.
People are more willing to take on risk in 2024 than they were in 2023. That’s because of the state of the economy and what’s happening with the Federal Reserve. And they want to tap into the expertise of a proven manager. We think with the PIMCO team, they certainly have that.
Chuck Jaffe: This is an interesting case to me. Because in these times, you can allocate your assets in fixed income. And say, I want this kind of bond fund or that kind of bond fund. This fund is really a go-anywhere bond fund. The question I have is, is it old enough? Does it have enough of a track record for us to say that, if they think in certain conditions a certain type of paper will do better, that they will really lean in?
In other words, it’s multisector. But how balanced is it going to be? How much is it going to be taking real chances and go, OK, we really want to lean one way or another.
Todd Rosenbluth: This is not a clone of the PIMCO Income Mutual Fund. But it’s a similar team that’s running it. Dan Ivascyn, being the CIO of PIMCO, is the lead portfolio manager for PYLD. He’s brought many of the same players that are known for the PIMCO Income Fund. We think that’s a good guide for how this fund will perform in historical time periods — the amount of risk that can be taken on.
Now, this fund is different. It has duration that’s more neutral versus the shorter-term-oriented mutual fund. But we think that’s a good guide. And this fund currently is exposed toward taking on some credit risk. It’s in high yield. It’s exposed to taking on some securities risk, leveraging on the mortgage capabilities Pimco has.
We really think this fund will go where it sees the best opportunities for reward, mindful of risk. And perhaps that’s well appropriate given the environment we’re in.
Chuck Jaffe: That means the really important thing for investors is to figure out how they want to use this. So let’s make an assumption that we’re dealing with investors who already have some bond exposure. So who should be considering adding this fund? And in what kind of allocation, versus it’s just another bond fund, you don’t need it.
Todd Rosenbluth: You’d have to be a believer in active management and have confidence in Pimco’s abilities. That’s probably a starting point. If you’re currently invested in a low-cost index fund tied to the aggregate bond index, you may want to pair an active manager that’s going to take on additional risk, looking for additional income. You certainly want to have a healthy exposure to fixed income, but be more risk tolerant.
This is going to take on more risk than a short-term bond fund or even a core bond fund. We think investors are going to get rewarded if they’re balancing it within the portfolio. But that’s why this is probably not your only fixed income allocation. You want to balance this with other more conservatively managed strategies based on your risk tolerance.
Chuck Jaffe: I know you’re not necessarily a trend follower. But ETF Trends was started by Tom Lydon, who was our guest for a long time. He’s vice chairman at VettaFi. This is also an interesting fund that way. Because being not quite a year old, it doesn’t yet have a 200-day moving average. When it has one — which should be in a few weeks — it should be above that 200-day average. But it’s about at its 50-day average.
Does any of that play into you? Do you want to wait to see this fund be a little more established? Or because it’s a Pimco big fund, we don’t worry. And the trend following, you can wire it on if you want.
Todd Rosenbluth: Well, if you’re a believer in trend following, you certainly want to use that data to help sort through what funds are out there. But I like the fact that the fund is outperforming. It’s outperforming the index-based strategies in 2024. I think if I went a little further back in time, based on your data, it would also be performing quite well.
So we think investors want to look at past performance that’s available for any actively managed fund and then tie in other capabilities that’s there. Some folks might want to wait to learn more about this fund.
As you mentioned, it’s coming up on its 200-day moving average data. It’s coming up on its one-year track record. But we think this Pimco fund is one to watch, and why we at VettaFi are increasingly educating advisors about Pimco’s suite of products.
Chuck Jaffe: It’s PYLD. The PIMCO Multisector Bond Active ETF. The ETF of the Week from Todd Rosenbluth at VettaFi. Todd, great stuff. Talk to you again next week.
Todd Rosenbluth: It’s my pleasure, Chuck. See you next week.
Chuck Jaffe: The ETF of the Week is a joint production of VettaFi and Money Life with Chuck Jaffe. And yes, I’m Chuck Jaffe. You can learn all about my hour-long weekday podcast by going to your favorite podcast app or checking out MoneyLifeShow.com.
To learn all about exchange traded funds, make sure you check out VettaFi.com. They have a full suite of tools that’s going to help you make sure that you are doing the best you can for and with your money. They’re on Twitter at @Vetta_Fi. Todd Rosenbluth is their head of research, my guest here on ETF of the Week. He’s on Twitter too. He is @ToddRosenbluth.
The ETF of the Week is here for you every Thursday. We hope you make sure you don’t miss an episode by subscribing or following along on your favorite podcast app. And until we do this next week, happy investing, everybody!
For more news, information, and analysis, visit VettaFi | ETF Trends.