ActiveETFs | InFocus

Date Launched: April 11, 2008

Links: Website, Factsheet, Prospectus

Investment Strategy:

(PLK: 25.53 0.00%) tries to achieve its objective of “total return” by investing at least 80% of its assets in US government, corporate and agency debt instruments. PLK seeks to provide alpha over the Barclay’s Capital 1–3 Year U.S. Treasury Index. Their strategy involves managing portfolio construction and security selection according to market conditions, macro-economic and sector level factors as well as issue specific factors. There is no minimum or maximum required investment in the 3 types of debt instruments mentioned above. The fund may invest in US Treasury futures as well as derivatives which can create leverage in the portfolio. PLK is expected to have a normal effective duration between 0-3 years. Finally, the fund is also allowed to invest up to 25% of its assets in non-investment grade securities or junk bonds.

Portfolio Managers:

Investment decisions for PLK are made by Invesco Institutional, primarily by the following portfolio managers who handle the day-to-day management of the fund. Invesco Institutional had around $194 billion dollars under management as of Dec 31, 2008.

Brian M. Schneider – Senior Portfolio Manager, who has been managing the fund since January 2009.

D. Scott Case – Portfolio manager, who also started managing the fund in January 2009.

The Numbers:

Expense Ratio – 0.30%

Average Bid-Ask Ratio – 0.61%

Average Volume – 4,067 shares

What’s special about it?

1. PLK was the second actively bond ETF on the market after the first launch by Bear Stearns.

Analysis:

Positives –

- By virtue of its mandate, PLK invests in short-maturity bonds and that can be a useful part to a well-rounded portfolio, especially when the market turns volatile and money flows into safe havens such as US Treasuries pushing their prices up.

- Looking at the performance of PLK relative to its benchmark, the Barclay’s Capital 1-3 Year Treasury Index (which is tracked by SHY), PLK does seem to provide an alpha of about 2.5% over the index since inception.

Negatives –

- A market cap of only $6.36 million after 22 months, does not provide much confidence in PLK’s appeal and longevity. The two other bond funds launched by PIMCO, MINT and MUNI, only months after being launched have already left PLK far behind in the dust when it comes to growth.

- With an average bid-ask ratio of 0.61%, simply going in and out of PLK means losing 1.2% of your investment and when the 1-year return on the ETF is just 2.77%, that accounts for a big chunk of your gains.

Performance since inception vs SHY (which tracks the Barclay’s Capital 1-3 Year Treasury Index) :

Disclosure: No position in above-mentioned names
 
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