PIMCO Offers New Active Bond ETF: MUNI

Today (12/1/2009) bond giant PIMCO launched its second actively-managed fixed-income ETF.  PIMCO Intermediate Municipal Bond Strategy Fund (MUNI) focuses on high-quality tax-free bonds issued by state and local governments at the intermediate maturity level.

PIMCO appears to be intent on cracking the actively-managed ETF code.  This will be a good business move if they are successful, potentially allowing the firm to command higher fees than other funds that simply track static indexes.

MUNI’s closest competitor is Market Vectors AMT-Free Intermediate Municipal Index Fund (ITM), which is not actively managed and has a lower expense ratio of 0.24% vs 0.35% for MUNI (after temporary expense waivers).  PIMCO no doubt hopes its bond expertise will overcome this drag.  It may not sound like much, but 11 basis points is a lot in the fixed income world.

The MUNI fact sheet shows the fund had assets of $8 million on the day before shares were offered publicly.  I presume this is seed money from PIMCO.  Time will tell if investors are willing to bite.  The first day of trading was not a good sign, with volume of exactly zero shares. More information can be found on the MUNI ETF page at the PIMCO site.

Disclosure covering writer, editor, and publisher: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned.  No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.