On Feb 2, 2010, PIMCO’s Short Term Municipal Bond Fund (SMMU: 50.5109 0.00%) began trading on the market. This is just the first of 3 additional Active ETFs that PIMCO has planned for launch and the remaining two (GOVY and PPRM) will likely be coming to market over the next few months as well.
SMMU will be investing in tax-free municipal bonds with the portfolio’s average duration expected to be less than 3 years. The portfolio is benchmarked to Barclays Capital 1-3 Year Municipal Bond Index and will be managed by EVP John Cummings. With the fund lacking a performance history, investing in it with confidence can be difficult, but investors can look to the PIMCO Short Duration Municipal Income Fund A, also run by John Cummings, which has essentially the same mandate as SMMU. This fund has outperformed its benchmark the last 1-yr period but has underperformed in a 3-yr, 5-yr, 10-yr period as well as since inception.
Looking at expenses, they currently match the expenses of the other two actively-managed bond ETFs launched by Grail, standing at 0.35%. However, they are only capped at 0.35% by contractual agreement till Oct 31, 2011, after which they may rise to 0.55%.
PIMCO already had two bond Active ETFs on the market, MINT and MUNI which have been trading since November, 2009. (MINT: 100.78 0.00%) is already by far the largest actively-managed ETF trading right now, with a market cap exceeding $100 million. (MUNI: 52.28 0.00%) on the other hand has taken some time to gain traction and investor interest. PIMCO’s new launches have lead the industry in providing actively-managed products that have actually attracted some money and this is mainly due to their solid reputation in the fixed-income markets. The success of actively-managed ETFs is largely restricted to the fixed-income space though, as many previously launched actively-managed equity ETFs, such as those from PowerShares, remain on the sidelines.
Be sure to read all the details on SMMU here: IN FOCUS: PIMCO Short Term Municipal Bond Fund (SMMU)
Disclosure: No position in mentioned names.
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