Newport Beach’s Pacific Investment Management Co. on Friday began trading a new exchange-traded fund that follows a major index and invests a portion in fixed-income assets.
The Pimco 0-5 Year High Yield Corporate Bond Index Fund will invest about 80% of its holdings in the securities of the BofAMerrill Lynch 0-5 Year US High Yield Constrained IndexSM.
The remainder of the fund will be invested in other assets, including bonds, debt securities and derivatives such as options, futures contracts or swap agreements, according to the prospectus.
It may also invest in mortgage related and other asset backed securities and securities tied to emerging markets.
The passive ETF will be managed by Vineer Bhansali, a managing director in Newport Beach.
The fund duration will closely correspond to the BofAMerrill Lynch index, which is a little longer than two years.
ETFs trade on exchanges like stocks and investors can buy and sell shares throughout the day, unlike mutual funds that are prices at the end of the trading day.
The booming investment strategy also carries some tax benefits and typically lower fees than traditional mutual funds.
Pimco manages four active ETFS and 10 that follow indexes, according to its website.
An active ETF is run by managers who pick individual securities and don’t follow a particular index. They debuted in 2008 and have garnered much hype in investment circles since ETFs surpassed the trillion dollar mark last year.
Pimco, which manages the world’s largest mutual fund, is in the midst of a long running diversification plan away from bonds.
The company is in the process of taking over the selling of its mutual funds from its German parent Allianz SE. Pimco is opening a brokerage for its mutual funds in New York.
In April Pimco filed documents with the Securities and Exchange Commission to raise $600 million in an initial public offering to launch a new real estate holding company.
Pimco, which manages $1.2 trillion in investments for pension funds, insurers, corporations and others, started its first stock fund, the Pathfinder, last year.
The company plans to debut its second stock fund, with a focus on emerging markets, this year with more expected in coming years.