Pimco, the world's biggest bond fund manager, filed paperwork with the Securities and Exchange Commission to offer an actively managed currency ETF, giving investors a way to profit from the secular decline in the dollar's value for most of the past 10 years.
The Pimco Foreign Currency Strategy Exchange-Traded Fund will normally invest at least 80 percent of its assets in currencies of, or fixed-income instruments denominated in currencies of, non-U.S. countries-including those from the emerging markets-that are likely to outperform the U.S. dollar over the long term.
The filing follows the announcement in April by the Newport Beach, Calif.-based company that it plans to roll out an ETF version of its flagship Pimco Total Return Fund. The latest filing covering the currency ETF is the fund's latest foray into active ETFs. It has a total of 13 exchange-traded funds, and four of them are active. One of its most successful active ETFs to date is the Pimco Enhanced Short Maturity Strategy Fund (NYSEArca:MINT). MINT, a money-market proxy, has more than $1 billion in assets.
The latest filing didn't disclose the currency's trading symbol and didn't say how much its annual expense ratio would be.
But Pimco said it will select the ETF's countries and currencies based on variables including relative interest rates, inflation rates, exchange rates, monetary and fiscal policies, trade and current account balances, legal and political developments, and other specific factors Pimco believes to be relevant.
The fund will normally limit its exposure to a single non-U.S. currency-from currency holdings or investments in securities denominated in that currency-to 20 percent of its total assets.
The ETF can invest both in investment-grade and high-yield securities rated "Ba" or higher by Moody's Investors Service, Inc., or an equivalent rating by Standard & Poor's Ratings Services or Fitch, Inc. Also, if unrated, any credits in the portfolio will be determined by Pimco to be of comparable quality, according to the filing.
The average portfolio duration of this fund varies based on Pimco's forecast for interest rates and, under normal market conditions, will vary from zero to three years, according to the filing.
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