PIMCO Enhanced Low Duration Active ETF’s Process Pillar rating is Average, but a strong management team still helps this strategy retain its Morningstar Medalist Rating of Bronze. The portfolio maintains a sizable cost advantage over competitors, priced within the second-cheapest fee quintile among peers.  

 The strategy’s management team earns a High People Pillar rating. The strategy earns an Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant underweight position in AA rated bonds and cash compared with category peers. The strategy's parent organization earns the firm an Above Average Parent Pillar rating. People Pillar 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

Morningstar's style-agnostic evaluation of this fund's process seeks to understand whether the strategy has a performance objective and sensible, repeatable execution. PIMCO Enhanced Low Duration Active ETF earns an Average Process Pillar rating.    The main driver of the rating is its parent firm's superior long-term risk-adjusted performance, as shown by the firm's average 10-year Morningstar Rating of 3.3 stars. The firm's five-year retention rate of 82% also bolsters the rating. Lastly, the process is limited by the parent firm's five-year risk-adjusted success ratio of 48%. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median Morningstar Risk-Adjusted Return for the period. The parent's modest success ratio suggests that the firm could do better across its fund lineup.

 Compared with other funds in the Short-Term Bond Morningstar Category, this fund, historically, hews closely to peers' credit and interest-rate sensitivity over the past few years. Opening the analysis to additional factors, the portfolio has displayed biases over time, whether towards or away from certain fixed-income instruments. Compared with the average strategy in the category, the managers have been significantly underweight AA rated bonds in recent years. In the latest month, the strategy has also relatively underweighted AA rated bonds compared with Morningstar Category peers. Additionally, the managers have shown a notable sector bias away from cash over the past few years. Similarly, in recent months, the strategy also had less exposure to cash than peers. Finally, during the past few years, the fund leaned meaningfully towards debt with 15- to 20-year maturities. In this month, the strategy also leaned more towards debt with 15- to 20-year maturities compared with its peers.

 This strategy has a 4.3% 12-month yield, higher than its average peer's 3.7%. It also has a 5.0% 30-day SEC yield (a measure similar to yield-to-maturity). Typically, higher yields come at the cost of higher credit risk. But that isn't always the case. Over the past 12 months, the average yield of the fund has been higher than the average yield of its Morningstar Category peers. The portfolio has a higher average surveyed credit quality of AA, compared with the category average of A, and it holds no non-investment-grade assets, despite the average peers' 2%. Strategies that take on less credit risk can often weather more-adverse market conditions.

Average

Process

PIMCO Enhanced Low Duration Active ETF earns a High People Pillar rating. Jerome M. Schneider, the longest-tenured manager on the strategy, boasts 16 years of listed portfolio management experience. The average Morningstar Rating of the strategies they manage is 3.5 stars, demonstrating above-average risk-adjusted performance relative to category peers. Jerome M. Schneider has an experienced backdrop of support. The three listed managers boast 13 years of average listed portfolio management experience.  The highest personal investment in this offering by any of its managers is at least $1 million. An investment of that size is large enough to align managers' interests with investors. The management team has provided the fund with commendable continuity. There have been no documented departures within the past three years.

 Note: The People Pillar rating is indirectly assigned by an analyst. The longest-tenured manager of the fund also manages a different product rated by an analyst. Their analyst-assigned People Pillar rating is combined here with the People scores (algorithmic or analyst-assigned) for the fund’s other managers on a tenure-weighted basis.

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.‎

Above Average

Parent

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