March 1, 2013

Top Portfolio Products: PIMCO, Vanguard Launch More EM Bond Funds

Also, First Trust says it will roll out a high-yield ETF with a long/short strategy

New products and actions introduced over the last week include a new emerging-markets bond fund from PIMCO, a Q2-planned emerging-markets government bond index fund and ETF shares from Vanguard, and the announcement from Vanguard that it has closed two of its funds to new advisor and institutional accounts.

In addition, First Trust launched a new actively managed ETF, and ETF Global announced a new series of ETF indices.

Here are the latest developments of interest to advisors:

1) PIMCO Launches Emerging Markets Full Spectrum Bond Fund

PIMCO has launched the PIMCO Emerging Markets Full Spectrum Bond Fund (I shares, PFSIX; A shares, PFSSX; D shares, PFSYX; C shares, PFSCX), designed to give investors a one-stop fixed-income strategy to capture the wide variety of investment opportunities in the developing world.

The fund provides an asset allocation and risk management framework for relative value investing across fixed-income and currency asset classes. It is managed by Michael Gomez, managing director and co-head of the global emerging markets portfolio management team.

2) Vanguard Adds Emerging Markets Government Bond Index Fund and ETF

Vanguard announced Thursday that it plans to introduce the Vanguard Emerging Markets Government Bond Index Fund (VGOVX) and its ETF shares by the end of Q2 2013.

VGOVX's target benchmark is the Barclays USD Emerging Markets Government RIC Capped Index. The index features approximately 540 government, agency and local authority bonds from 155 issuers and, when necessary, limits weightings of individual debt issuers to meet IRS diversification requirements. The fund will invest solely in U.S. dollar-denominated emerging market bonds to protect U.S.-based investors from currency risk.

The expense ratios for the ETF, Investor, Admiral and Institutional shares will range from 0.30%–0.50%. The industry's average emerging markets bond fund features an expense ratio of 1.21%.

The fund will assess a purchase fee of 0.75% on all non-ETF shares to help offset the higher transaction costs associated with buying emerging markets bonds.

3) Vanguard to Limit Growth of Two Funds

Vanguard is moving to curtail cash flow into two funds: the Vanguard Wellington Fund (VWELX) and the Vanguard Intermediate-Term Tax-Exempt Fund (VWITX). Effective immediately, the two funds will no longer accept new accounts from financial-advisor or institutional clients, but will remain open to these clients for additional purchases. Retail clients may continue to establish new accounts and make additional purchases without limitation.

Vanguard will continue to monitor cash flows of both the VWELX and VWITX, and will take additional steps to limit the size of the funds if needed. Similarly, should conditions change, Vanguard may reopen the funds.

4) First Trust Launches High Yield Long/Short ETF

First Trust Advisors L.P. has launched a new actively managed ETF, the First Trust High Yield Long/Short ETF (HYLS), which seeks to provide current income by investing primarily in a diversified portfolio of below-investment-grade or unrated high-yield debt securities, including U.S. and non-U.S. corporate debt obligations, bank loans and convertible bonds. Its secondary objective is to generate capital appreciation.

HYLS’s investment approach includes a long/short strategy designed to capitalize on investment opportunities in various market environments.

Under normal market conditions, its portfolio managers, William Housey, Scott Fries, Peter Fasone, Todd Larson and Eric Maisel, intend to maintain long and short positions in securities, and consequently may take short positions in U.S. Treasury securities and/or corporate debt obligations that may be rated investment-grade or considered to be high-yield securities.

The ability to maintain short Treasury positions allows the portfolio managers to potentially isolate a portion of the interest-rate risk from the credit risk inherent in the high-yield securities in HYLS’s portfolio.

5) ETF Global Announces ETFG Series of ETF Indices

ETF Global announced Wednesday that it was introducing a new ETFG-branded series of indices, including the Benchmark ETFG 500 and Dynamic Indices, which are based on the proprietary ETFG Quant model. The first three indexes are as follows:

ETFG 500 (ETFG500 Index), a market-capitalization-weighted index comprising the 500 largest U.S.-listed exchange-traded products, as ranked by market capitalization, excluding all levered and inverse products. It represents the universe of ETFs, crosses asset classes and regions, and is rebalanced quarterly and reconstituted annually.

The ETFG Golden Dozen (ETFGQE12 Index), comprising the top 12 equity ETFs as ranked by the ETFG Quant model prior to trading on the third Friday of each month. The selection pool includes all U.S.-listed equity ETFs, excluding levered and inverse funds as well as those funds with average daily trading value of less than $5 million. The portfolio is equally weighted and reconstitutes monthly on the second trading day following selection.

ETFG Quant Equity 10 (ETFGQE10 Index), made up of the top 10 equity ETFs as ranked by the ETFG Quant model, prior to trading on the third Friday of each month. The selection pool includes all U.S.-listed equity ETFs, excluding levered and inverse funds. The portfolio is equally weighted and rebalances monthly on the second trading day following selection.

Read the Feb. 25 Portfolio Products Roundup at AdvisorOne.

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