May 2, 2012

PIMCO Launches Active TIPS ETF

ETF with actively managed global inflation-linked bonds to use GDP-based investment approach

Fresh off the heels of the release of its Total Return ETF, PIMCO on Tuesday began trading its Global Advantage Inflation-Linked Bond Strategy Fund (ILB) on the NYSE.

According to the Newport Beach, Calif.-based bond behemoth, the latest ETF is designed for long-term returns above inflation by actively managing global inflation-linked bonds and currencies. The fund is managed by Mihir Worah, managing director and head of PIMCO’s real return portfolio management team.

“ILB continues the expansion of PIMCO’s range of actively managed ETFs, which combine PIMCO’s time-tested global investment process and expertise in managing global fixed income with the tradability of an ETF vehicle, providing investors intraday pricing and daily portfolio disclosures in a single share class,” the company said in a statement.

PIMCO believes globalization exposes investors to price pressures and growth patterns of countries around the world, creating a need for a fuller set of inflation-oriented investments. ILB uses global inflation-linked bonds and currencies to diversify investors’ inflation protection strategies.

The company notes it will also be actively managed against a gross domestic product (GDP)-weighted benchmark, with the intent to better align investors’ exposure to countries experiencing stronger growth. This is in contrast to traditional market-cap weighted benchmarks, which allocate relative to the inflation-linked bond issuance of each country.

“In this uncertain global economy, some of the key drivers of growth are developing economies, which are often more sensitive to inflationary pressures like commodity prices,” Worah said. “Our forward-looking Global Advantage approach aims to expose investors to the inflation-linked bonds and currencies of these faster-growing economies, potentially resulting in higher real yields than traditional investing using market cap-weighting.”  

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Read Investment Advisor magazine's profile of PIMCO CEO Mohamed El-Erian, one of this year's IA 25, on AdvisorOne.

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