A strong management team and sound investment process underpin PIMCO Investment Grade Corporate Bd ETF's Morningstar Medalist Rating of Bronze. The portfolio maintains a cost advantage over competitors, priced within the least expensive fee quintile among peers.  

 The strategy’s management team earns an Above Average People Pillar rating. The strategy merits an Above Average Process Pillar rating.  The strategy's parent organization earns the firm an Above Average Parent Pillar rating. People, Process and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

Analyst Rating

Entering February 2023, nearly half of the fund's portfolio carried a BBB credit rating, reflecting the credit profile of the investment-grade corporate bond market.  While the strategy is vulnerable to drawdowns when credit spreads widen, it should hold up better relative to category peers that delve into riskier corners of the bond market. For example, the average category peer held more than 6% of its portfolio in junk-rated debt, which this fund omits.
The largest corporate debt issuers tend to be in the financial industry, and the strategy tilts toward the sector, accordingly. As of February 2023, financial services issuers represented 36% of the fund's portfolio. Concentration risk is effectively mitigated by this fund's broadly diversified portfolio of over 9,500 bonds. The fund allocates no more than 2% to any bond issuer while its top 10 holdings account for less than 1% of the portfolio, such that risks endemic to any one company will not affect the fund's performance.

Note: The Process Pillar rating and analysis are indirectly assigned by an analyst. When an analyst covers a passively managed vehicle that tracks a particular index, Morningstar associates the Process Pillar rating assigned to that vehicle with the index concerned. Morningstar then maps the Process Pillar associated with a given index to any other uncovered passive strategies that track the same index. This ensures that the analyst’s view is leveraged whenever available and promotes consistency when analyzing passive vehicles associated with a given index.

Above Average

Process

PIMCO Investment Grade Corporate Bd ETF benefits considerably from its fixed income team, earning it an Above Average People Pillar rating. There are three managers listed on the fund: Amit Arora, Matthew Dorsten, Tanuj Dora. The team is well equipped, with an average of 11 years of portfolio management experience. Though they do not manage other products together, managers may manage them individually.  

 Note: This People Pillar rating is indirectly assigned by an analyst. Morningstar analysts evaluate the People Pillar for passive products at the brand level and may also differentiate by asset class. There is at least one other passive strategy at the firm that is covered by a Morningstar analyst, so the People Pillar rating of the fund is inherited from the rating that the Morningstar analyst assigned to investment vehicles under the same brand name.

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 Investment Grade Corporate Bond ETF

CORP tracks a market-value-weighted index of USD-denominated investment-grade corporate bonds.

I review the PIMCO Investment Grade Corporate Bond Index ETF and compare it to the HYG ETF and FALN ETF, which invest in lower-rated corporate bonds. The article analyzes the risk and return of each ETF, highlighting the differences in ratings, yields, and portfolio strategies. Based on that analysis, my view is CORP is only for very conservative investors as the return lost is not justified by the risk avoided. At best, a Hold rating.

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