When I think of actively managed fixed income ETFs, PIMCO is one of the firms to come to mind. David Braun, who manages the PIMCO Active Bond ETF (BOND ), helped kick off the VettaFi Fixed Income Symposium. Braun’s colleague, David Hammer, manager of PIMCO Intermediate Municipal Bond Active ETF (MUNI ), also spoke at the fixed income event about the merits of active ETFs for municipal bonds.
Meanwhile, PIMCO has expanded its active lineup in 2023 with products like the PIMCO Preferred & Capital Securities Active ETF (PRFD ), the PIMCO Ultra Short Government Active ETF (BILZ ), and the PIMCO Multisector Bond Active ETF (PYLD ). Jerome Schneider, who helps manages BILZ, also manages the PIMCO Enhanced Short Maturity Active ETF (MINT ).
See also: ETF 360 on PIMCO’s PRFD ETF
I caught up in August at the New York Stock Exchange with Greg Hall, head of US global wealth management at PIMCO. Hall and his colleagues were part of a bell-ringing event.
Taking an Active Approach
VettaFi: PIMCO was a pioneer with active bond ETFs. What about the bond market is conducive to taking an active approach?
Hall: Inefficiencies in the bond market create opportunities for potential outperformance. The bond market is larger and more complex than the equity market. More than half of investors in the $100 trillion global bond market are non-economic investors. Like central banks, insurers, and others, who are simply holding bonds and not seeking total return or outperformance. All of these aspects create opportunities for outperformance.
Active management allows investment in a much broader asset selection than in the index. The Bloomberg Agg, the guiding index for the bulk of passive bond funds, is concentrated across three main sectors. In contrast, the global bond market comprises many additional fixed income sectors. These include global bonds and US TIPS, which means greater diversification and risk-adjusted return opportunities.
VettaFi: What should advisors know about an active ETF that differentiates them from an active mutual fund?
Hall: At PIMCO, we create products – whether mutual funds, ETFs, or alternative strategies. Where we see investment opportunities and where we believe we can add value for our clients. Our approach is to provide the best solution to meet our client’s needs.
Different vehicle structures can influence the strategies we employ within them, and advisors should understand the distinctions. They may value the ease of transacting with ETFs, their transparency, or their tax features. But they also need to weigh that against the generally larger scale and longer track records of mutual fund products. Ultimately, our job is to seek to deliver the strongest risk-adjusted performance we can in each vehicle type.
Setting PIMCO Apart
VettaFi: Let’s talk about the recent expansion of the active ETF lineup. What makes these funds different than your pre-existing lineup?
Hall: Over the last 18 months, we’ve brought six new active ETFs to the market. Each of which addresses an investment opportunity and utilizes our expertise across sectors. Most recently, we launched BILZ and PYLD.
BILZ is the most conservative of our short-term products. The fund uses active management to seek to maximize current income. While also aiming to preserve capital for investors looking for alternatives to traditional cash investments.
PYLD is our first ETF in the multi-sector category, meaning the portfolio management team can invest across sectors where they see the best risk-adjusted yield opportunity.
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