Pacific Investment Management Co. plans to open its first actively run exchange-traded funds as it seeks to catch up with rivals in this fastest-growing segment of the mutual fund business.
Pimco, the world's biggest bond manager, will offer five exchange-traded funds in which the investments are selected by portfolio managers, according to a registration statement it filed Wednesday with the Securities and Exchange Commission. Three will invest in debt maturing in less than one year and two will focus on municipal bonds, according to the filing.
The Newport Beach, Calif., company's first exchange-traded fund, tracking an index of short-term U.S. Treasuries, launched in June. Pimco plans to open six other passive funds. A latecomer to ETFs, Pimco aims to use its bond market expertise to compete in an industry led by Barclays Global Investors (which is being sold to BlackRock Inc.) and State Street Corp. ETF assets have surged tenfold in the past decade, to $582 billion, according to the Investment Company Institute.
"When you look at a five-star shop like Pimco, it adds value over and above what an index can give you," said Scott Burns, director of ETF analysis at Morningstar Inc. "Investors can get that benefit and have the advantage of an ETF structure."
Grail Advisors LLC became the first company to offer an ETF in which managers select individual stocks in the style of a traditional fund, the San Francisco firm said in May. Grail American Beacon Large Cap Value is subadvised by American Beacon Advisors of Fort Worth.
Pimco, which oversees about $756 billion, is a unit of the insurer Allianz SE of Munich. "ETFs are increasingly an important investor tool," said Don Suskind, Pimco's head of ETF product development. "By offering active ETFs, we believe there will be a broader set of investors that can access Pimco's investment expertise."
Pimco is evaluating some of its other strategies to see if they would be appropriate in ETFs, Suskind said.
Assets in bond ETFs more than doubled from the end of 2007, to $74 billion at the end of May, according to State Street.
Barclays Global, of San Francisco, is the world's biggest manager of ETFs, with $290.7 billion listed in the United States at the end of May, according to State Street. Barclays PLC announced in June it had agreed to sell the unit to BlackRock.