Pimco Launches Short-Dated Corp. Junk ETF


Pimco, the world's biggest bond fund manager, today rolled out a high-yield corporate bond index ETF focused on the short end of the yield curve, offering investors an alternative to popular longer-dated exchange-traded junk bond options that are likely to be more vulnerable to increases in interest rates.

The Pimco 0-5 Year High Yield Corporate Bond Index Fund (NYSEArca:HYS), which is based on the BofA Merrill Lynch 0-5 Year US High Yield Constrained Index, comes with an expense ratio of 0.55 percent after a fee waiver, the Newport Beach, Calif.-based company said on its website.

Noninvestment-grade debt looms as a promising way to obtain extra yield at a time when benchmark short-term interest rates remain near zero after the breakdown of global credit markets provoked a market crash and perhaps the worst downturn since the 1930s. Moreover, short-dated debt prices hold up better than longer-dated bonds when rates rise, adding to their attractiveness.

The most popular high-yield U.S.-listed ETFs are the iShares iBoxx $ High Yield Corporate Bond Fund (NYSEArca:HYG) and the SPDR Barclays Capital High Yield Bond ETF (NYSEArca:JNK).

HYG's portfolio has an average maturity of just over five years, while JNK's is about seven years, the companies said on their respective websites. HYG has more than $8.5 billion in assets, while JNK has gathered about $7 billion, according to data compiled by IndexUniverse.

The noninvestment-grade debt in the new Pimco fund must be dollar denominated and issued in the U.S. It must have fewer than five years' remaining term to final maturity, a fixed coupon schedule and a minimum amount outstanding of $100 million, issued publicly, the company said. Also, allocations to an individual issuer will not exceed 2 percent.

Don't forget to check IndexUniverse.com's ETF Data section.

Copyright ® 2011 Index Publications LLC . All Rights Reserved.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , ETFs

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