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.