Pimco Active Bond ETF brings to bear some of the industry’s best managers and resources in pursuit of steady income without excessive risk.
David Braun, Dan Hyman, and Jerome Schneider were brought in to run the portfolio when Pimco changed its approach from total return to its current income-focused style in 2017. Pimco added Braun to the team in part based on his expertise in managing liability-driven and insurance portfolios with an income focus. Hyman, Schneider, and the rest of the Pimco staff supporting this offering have delivered excellent results with other strategies under their guidance.
Unlike nearly all its other strategies, Pimco manages this one with an explicit focus on income payouts rather than maximizing total return, with the goal of generating a stable, higher level of dividend income than a standard marketlike portfolio. It's thus less benchmark- and total-return-oriented than Pimco's flagship total-return strategy, for example, but also not meant to take on the level of risk inherent in more aggressive offerings such as Pimco Income PIMIX. That can mean favoring more use of income-producing securities, less trading, and fewer tools that might help boost total returns but not distributable income.
Some of the strategy’s investment parameters are at the more permissive range among core-plus offerings, but it hasn't tested those boundaries; its high-yield limit is 30% of assets, for example, but below-investment-grade exposure has averaged around 9% over the past five years. By contrast, the strategy is less exposed to non-U.S.-dollar bonds and currencies, the latter of which typically don't generate periodic income. As with other less-benchmark-centric Pimco funds, this one's duration range runs between 2 and 8 years, but it has mostly kept that metric at or below its peers’ average and that of the broad market in recent years.
That profile has likely played a role in the fund’s record in recent years of generating above-average income combined with middling total returns relative to other intermediate-term core plus bond funds. The portfolio also felt more pain than most core-plus offerings during the first half of 2022 as credit-sensitive markets took it on the chin, which put a dent in its longer-term record. The fund’s 0.75% annualized return since the May 2017 strategy change trailed the Morningstar Core Plus Bond Index by 23 basis points.

Analyst Rating

This otherwise attractive offering has thus far endured a trade-off to achieve its income mandate.

Director

Eric Jacobson

Pimco Senior Loan Active Exchange-Traded Fund

PIMCO Enhanced Short Maturity Active ETF

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Combining Pimco's investment acumen with thoughtful income-focused tools earns the strategy an Above Average Process Pillar rating.
This strategy is designed to generate a higher and more consistent distribution yield than the Bloomberg US Aggregate Bond Index without taking on the risk that more aggressive multisector strategies bear. The strategy's exposure limit to high-yield bonds rose to 30% from its prior 10% level after a 2017 strategy change, but Pimco has in practice been cautious on credit risk. Meanwhile, its exposure caps to non-U.S.-dollar-denominated bonds and currencies were taken to 15% (from 30%) and 10% (from 20%), respectively. Currency trades don't typically generate periodic income but can introduce a lot of volatility. 
That said, the team has sought to generate income more efficiently in ways that have had little impact on the fund's overall risk profile, including focusing on actual mortgage pools rather than generic mortgage TBA forward contracts. Management has still used them when valuations and market dynamics warrant, but the fund's investment style is more strategic overall, with less emphasis on short-term tactical trading strategies, and the firm looks to actively manage its year-end capital gains distributions.
The strategy has the flexibility to manage its duration between 2 and 8 years, but it has mostly kept that metric at or below its peers’ average and that of the broad market in recent years.

Above Average

Process

The fund's management team was reorganized in May 2017 in step with its change in mandate.
In addition to Jerome Schneider and Dan Hyman, Pimco added David Braun to the team in part based on his expertise in managing liability-driven and insurance portfolios with an income focus. Although he didn't have a public record when he joined this strategy, it has been more than five years since he did so, and things have gone well. Hyman, Schneider, and the vast and experienced Pimco staff supporting this offering have delivered excellent results with other strategies under their guidance, all supporting a People Pillar rating of High.
Schneider also runs Pimco Short-Term PTSHX and was named Morningstar Fixed-Income Fund Manager of 2015. Hyman co-heads Pimco's agency mortgage team and joined Pimco from Credit Suisse in 2008. Braun heads Pimco's U.S. financial institutions group team and has more than 25 years of investment, actuarial, and risk-management experience.
Given its aim to produce higher and more stable income, Pimco has effectively positioned this fund as a less-aggressive exchange-traded fund version of Pimco Income PIMIX. Those goals do carry some overlap with the expertise of Schneider and Hyman, and both of them focus more on higher-quality areas of the market, including the short-duration, high-quality, and agency mortgage-backed securities arenas.

High

People

Some concerns notwithstanding, Pimco's massive resources--both capital and human--and its laser ‎focus on excellence merit an Above Average Parent rating.‎
True, Pimco could be better on pricing. Shareholders, particularly in Europe, haven't enjoyed the ‎economies of scale that they could given Pimco's massive asset base. The firm, however, believes its ‎pricing is fair based on what it consistently delivers for investors, and it's hard to argue that's not the ‎case.‎
Pimco has generally enjoyed great success with its intense working culture, even if departures are a ‎byproduct of that intensity and can sometimes dim the near-term outlook on strategies. Yet, more ‎often than not, Pimco draws on its legion of skilled people and positions the next generation to ‎thrive.
CIO Dan Ivascyn and CEO Manny Roman ‎represent that next generation and have built on the organizational strengths they inherited. An experienced and critical-thinking investor, ‎Ivascyn has sought to curate an elite staff and capable investment culture since he assumed his ‎current role in 2014 and since Roman joined him in 2016. They have significantly grown the firm's pool ‎of investment professionals and supported them by spending massively on technology and ‎technologists to spur persistent outperformance while keeping risk in check. There may be a few others in Pimco's league, but very few.‎

Parent

PIMCO Active Bond ETF

BOND is an actively managed portfolio that aims to maintain a consistent level of dividend income by investing in a broad array of fixed income sectors and utilizing income efficient implementation strategies.

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