Pimco, the world's biggest bond fund manager, set May 1 as the
launch date for its actively managed Pimco Global Advantage
Inflation-Linked Bond Strategy Fund (NYSEArca:ILB)-exactly two
months after the rollout of Bill Gross' Pimco Total Return ETF
ILB will, under normal circumstances, invest at least 80 percent
of its assets in inflation-linked bonds that are tied to at least
three developed and emerging market countries, according to
regulatory paperwork detailing ILB that the company first filed in
November 2010. Those countries can include the U.S., the filing
"In this uncertain global economy, some of the key drivers of
growth are developing economies, which are often more sensitive to
inflationary pressures like commodity prices," Mihir Worah, the
portfolio manager who will run the new global TIPs fund, said in a
"Our forward-looking Global Advantage approach aims to expose
investors to the inflation-linked bonds and currencies of these
faster-growing economies, potentially resulting in higher real
yields than traditional investing using market-cap weighting,"
The launch of ILB will mark Pimco's latest attempt to breathe
life into the world of active ETFs. Active ETF strategies make up
less than 1 percent of the nearly $1.2 trillion in ETF assets, but
by the looks of it, the Newport Beach, Calif.-based company is
making inroads toward changing that.
BOND-the ETF version of Gross' $250 billion Total Return Fund,
the biggest mutual fund in the world-has gathered more than $500
million in less than eight weeks, a successful beginning by any
Also, the Pimco Enhanced Short Maturity Strategy Fund
(NYSEArca:MINT), a money-marketlike ETF, has $1.53 billion in
assets, making it the biggest active ETF to date. The WisdomTree
Emerging Markets Local Debt Fund (NYSEArca:ELD) comes in a close
second, with $1.25 billion in assets.
Interest in inflation-protected bonds has been on the upswing
amid growing concern among investors that excessive monetary
stimulus from central banks such as the Federal Reserve is creating
inflationary pressure that will rear its head before long.
The iShares Barclays TIPS Bond (NYSEArca:TIP), the biggest
fixed-income ETF and the eighth-biggest U.S. ETF at the end of
March, had $22.51 billion in assets as of April 23, according to
data compiled by IndexUniverse.com.
The effective duration of the planned ETF will normally vary
within plus or minus two years of the effective duration of the
Pimco Global Advantage Inflation-Linked Bond Index. Duration is a
measure used to determine the sensitivity of a security's price to
changes in interest rates. The longer a security's duration, the
more sensitive it will be to changes in interest rates, the filing
The value of the bond's principal or the interest income paid is
adjusted to track changes in an official inflation measure.
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