Pacific Investment Management Co., the world’s biggest bond manager, plans to start 19 actively managed exchange-traded funds as co-founder Bill Gross further diversifies the firm following Chief Executive Officer Mohamed El-Erian’s resignation last week.
Pimco will more than triple its active ETF lineup by offering variations of mutual funds such as Pimco Income, Pimco Unconstrained Bond, Pimco Municipal Bond and several StocksPlus and IndexPlus products, according to regulatory filings with the Securities and Exchange Commission on Jan. 24. The StocksPlus funds attempt to beat the equity market with bonds and derivatives. IndexPlus funds use an untraditional benchmark that isn’t dominated by market capitalization.
Gross, who will continue as chief investment officer, said in an interview last week that the firm intends to emphasize the performance of the StocksPlus family he has led since starting them in the 1980s. He said Pimco will continue to try to be a “global investment authority” and show the depth of its investment talent by appointing deputy CIOs for different asset classes.
“We believe actively managed ETFs provide another way for investors to access Pimco’s global strategies across fixed income, equities and commodities, all backed by the firm’s time-tested investment process,” the Newport Beach, California-based firm said today in an e-mailed statement.
The $29.9 billion Pimco Income Fund, run by one of the first two new deputy CIOs, Dan Ivascyn, averaged returns of 15 percent in the five years through Jan. 24, ahead of 99 percent of rivals, according to data compiled by Bloomberg. The $26.8 billion Pimco Unconstrained Bond Fund, which is overseen by Gross as former manager Chris Dialynas prepares for a sabbatical, returned an annualized 4.7 percent in the same period, behind 82 percent of peers, according to data compiled by Bloomberg.
Pimco will also start active ETFs that are similar to its $6 billion Pimco Foreign Bond Fund (U.S. Dollar Hedged), $6.5 billion Pimco CommoditiesPlus Strategy Fund. Another ETF will be a version of the $1.2 billion StocksPlus Absolute Return Fund, run by Gross, which returned an annualized 26 percent over the past five years, ahead of 96 percent of similar funds, according to data compiled by Bloomberg.
Gross’s $237 billion Pimco Total Return had record withdrawals of $41 billion last year, according to Morningstar Inc. estimates, as investors fled traditional bond funds because of rising interest rates. Pimco as a whole had $30.4 billion in net redemptions during 2013, compared with net deposits of $62.7 billion in 2012, the biggest drop in organic growth among the 10 largest U.S. mutual-fund families, the Chicago-based research firm said.
Gross, 69, in 2012 created an active ETF variation of Total Return. The $3.5 billion ETF had withdrawals of $197 million last year, according to Morningstar estimates.
The firm, which oversaw $1.92 trillion in assets as of Dec. 31, has nine active ETFs in its product line, according to its website.
Under El-Erian, 55, who made a name for himself investing in emerging-market debt early in his Pimco career, the bond firm more than tripled its assets under management as investors flocked to fixed income after the 2008 financial crisis. Money in non-traditional funds rose to 66 percent of Pimco’s assets from 56 percent when El-Erian became CEO, according to an internal memo to employees last week obtained by Bloomberg News.
Unlike traditional passive ETFs that track an index, active ETFs blend the trading flexibility and accessibility of ETFs with managers’ investment-picking abilities.