A strong management team and sound investment process underpin PIMCO 25+ Year Zero Coupon US Trs ETF's Morningstar Medalist Rating of Bronze. The portfolio maintains a cost advantage over competitors, priced within the second-lowest fee quintile among peers.  

 The strategy’s management team earns an Above Average People Pillar rating. The strategy's investment approach stands out and earns an Above Average Process Pillar rating.  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

PIMCO 25+ Year Zero Coupon US Trs ETF earns an Above Average Process Pillar rating. Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category benchmark on a risk-adjusted basis over the long term. The most significant contributor to the rating is the fund's strong long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category average, which suggests that the process was successful over that period. This fund tracks an index, which also increases its process rating. Historical data, such as Morningstar's Active/Passive Barometer, shows that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. 

The investment strategy as stated in the fund's prospectus is: 

The investment seeks to provide total return that closely corresponds, before fees and expenses, and to the total return of the ICE BofA Long U.S. Treasury Principal STRIPS Index.  The fund invests at least 80% of its total assets (exclusive of collateral held from securities lending) in the component securities of the ICE BofA Long U.S. Treasury Principal STRIPS Index (the "underlying index"). The underlying index is an unmanaged index comprised of long maturity Separate Trading of Registered Interest and Principal of Securities ("STRIPS") representing the final principal payment of U.S. Treasury bonds.  

 This strategy's 12-month yield is 3.8%, lower than its average peers' 4.0%. It also has a 4.1% 30-day SEC yield (a measure similar to yield-to-maturity). While a lower yield may deliver less income, it also tends to indicate lower credit risk. But that isn't always the case. Over the past 12 months, the average yield of the fund has been lower than the average yield of its Morningstar Category peers. The portfolio's average surveyed credit quality is on par with peers, with both the fund and the average being rated AAA. In terms of interest-rate risk, compared with others in the Long Government category, this fund maintains a significantly elevated average effective duration of 26.5 years compared to the category's 16.9 years. The longer a strategy's duration, the more sensitive it is to shifts in interest rates. This fund, with a 26.5-year duration, is expected to gain 26.5% of its net asset value if interest rates drop by 1 percentage point, and vice versa.

Above Average

Process

PIMCO’s fixed income team is strong compared with others in the industry, resulting in an Above Average People Pillar rating. There are three managers listed on the fund: Matthew Dorsten, Tanuj Dora, Tim Crowley. 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 25+ Year Zero Coupon US Treasury Index ETF

ZROZ tracks a market-weighted index comprising separate trading of registered interest and principal of Securities (STRIPs), with a remaining maturity of 25 years+.

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News for PIMCO 25+ Year Zero Coupon US Treasury Index ETF ETF (ZROZ)