To get the Best of the Bond Market delivered to your email daily click here.
The changes are coming thick and fast at PIMCO. Following last weeks shock resignation of longtime co-chief executive Mohamed El-Erian, today we have news that the bond giant is set to launch 19 actively managed ETFs.
The new funds will more than triple PIMCO’s active ETF lineup by offering variations of mutual funds such as PIMCO Income, PIMCO Unconstrained Bond, PIMCO Municipal Bond and several StocksPlus and IndexPlus products, according to regulatory filings with the Securities and Exchange Commission on Jan. 24.
The move is set to counteract the growing threat from passively managed funds like those offered by Vanguard Group, which have made strong gains this year at PIMCO’s expense. Actively managed ETFs blend the trading flexibility and accessibility of ETFs with managers’ investment-picking abilities.
But it begs the question, was there a difference of opinion between El-Erian and Gross as to the future direction of the bond giant? The timing of these new releases, coming just one week after El-Erian announced his resignation, suggests there is more to this than meets the eye.
El-Erian was seen by many, as heir to 69 year old Bill Gross’s throne at PIMCO, so his departure came as something of a shock. But maybe it’s telling that he will remain at PIMCO’s parent Allianz for the foreseeable future. Who knows, if this new direction for PIMCO fails to stem outflows, El-Erian may make a triumphant return to PIMCO.
Todays Other Top Stories
Junius: – Short-term, high yield municipal bond ETF. – On January 14, Market Vectors launched a new ETF, the Market Vectors Short High-Yield Municipal Index ETF (SHYD), which seeks to track the performance of the Barclays Municipal High Yield Short Duration Index.
Barron’s: – Rebalance with munis. – After a remarkable year for stocks in 2013, and now a selloff, the importance of periodically rebalancing portfolios, and taking profits at the right time, is once again apparent. And yet what to do with that historic but now troubled ballast, the fixed income portion of the portfolio? According to Wilmington Trust chief investment officer Rex Macey, for high net worth individuals, municipal bonds offer the best returns based on their relative risk and their inherent tax benefits.
Forbes: – Wall Street’s vultures are circling Puerto Rico’s bond market. – The vulture hedge funds are circling Puerto Rico’s $70 billion municipal bond market and are about to swoop. This is another round of disturbing news for Mom and Pop investors who own UBS closed-end Puerto Rico bond funds as well as the tens of thousands of other investors who own Puerto Rico debt in Municipal bond funds that brokers sold to them as safe, steady and reliable investments.
Reuters: – U.S. municipal bond trade markups face new regulatory scrutiny. – The compensation that dealers receive in U.S. municipal bond trades is once again in regulators’ crosshairs, with a member of the Securities and Exchange Commission saying on Monday that he is investigating how to give investors more information about markups.
Bloomberg: – Detroit suburbs balk at spinning off water works to help city. – Time is running out for Detroit Emergency Manager Kevyn Orr to persuade suburban leaders and bondholders to help the city wring cash from its water-and-sewer system, a key to resolving its bankruptcy.
LearnBonds: – The quest for fire (and a burning room). – Market volatility witnessed last Thursday and Friday caught many investors and market participants by surprise. Defenders of Emerging Markets (and other high risk asset classes) point out that not much has changed regarding the underlying fundamentals of most emerging market nations. There are indeed positives in emerging markets.
Zacks: – Long-term Treasury ETFs back in focus. – After a lackluster 2013, the fixed income world is finally gaining some traction this year. In particular, investors are adding long-term Treasuries to their portfolio as surprisingly weak jobs growth and low inflation for December raised concerns about sustained economic improvement and continuation of Fed taper plans.
About.com: – Everything you need to know about floating rate Treasuries. – The market for floating-rate Treasuries is expected to grow to hundreds of billions of dollars over time due high interest from money market funds and foreign central banks, reports the Wall Street Journal. The securities should see demand from investors who will welcome a way to boost yields in short-term portfolios without having to take on greater interest-rate and/or credit risk to do so.
Investment Europe: – Interest rates key concern for global high yield investors this year. – Tim Dowling, head of Credit Investments and lead portfolio manager Global High Yield at ING IM, says interest rates are key for high yield investors this year.
IFR Asia: – Market wide open despite EM nerves. – Any fears that emerging market volatility would shut the U.S. high-yield primary market evaporated on Monday as five issuers announced new deals, spurred by more stable market conditions and the relatively good performance of recent new deals.
TheStreet: – Best way to play emerging markets may be bonds. – Despite growing concerns over emerging markets, David Robbins, portfolio manager responsible for emerging market strategies at TCW, told TheStreet’s Gregg Greenberg there is a way to safely play the asset class.
BusinessWeek: – Morgan Stanley more bearish on EM debt as funding costs increase. – Morgan Stanley turned more bearish on sovereign and corporate debt in emerging markets as declines in their currencies accelerated and funding costs increased.
CNBC: – Emerging markets ETFs: Which to buy, which to avoid. – CNBC’s Bob Pisani speaks to Matt Hougan, IndexUniverse, president of ETF Analytics, about how emerging market ETFs are performing amidst trouble in emerging markets sector. Hougan also reveals his best emerging market play.
MarketWatch: – Emerging markets fund flows more restrained than last summer. – Here’s some good news about the emerging markets beating that’s screamed from headlines in the last week. It’s not as bad as last summer — yet.
MoneyNews: – Mark Mobius: Emerging market turmoil will be ‘temporary’. – The chaos striking emerging markets, with currencies and asset markets plummeting, won’t last, says Mark Mobius, executive chairman of Templeton Emerging Markets Group.
Closed End Funds
InvestorPlace: – Closed-end funds: 5 CEFs yielding 5%-plus. – Want a big yield and some value to boot? Try looking towards closed-end funds.
bradenton.com: – Investors column: Avoiding bond suicide. – Is it any wonder that the concept of the “conservative investor” is evolving? Inflation, higher interest rates and a red-hot stock market, heading towards correction, are creating a new breed of conservative investor.
The Gazette: – Concentration can be counterproductive in an investment portfolio. – During my career as a banker and now as an investment adviser, I have had the opportunity to see many different types of investment portfolios. One thing that I have learned to look out for is “overconcentration”.
Zacks: – Zacks #1 ranked government bond funds. – Conservative investors prefer debt instruments not only because they safeguard the capital invested but also for the regular income flows they provide. Bonds bring a great deal of stability to an equity-heavy portfolio while providing dividends more frequently than individual bonds. U.S government bonds funds usually invest in Treasury bills, notes and securities issued by government agencies. They are considered to be the safest in the bond fund category and are ideal options for the risk-averse investor.
MarketWatch: – Bond rally shows Fed tapering fears were overdone. – That seemed to be the thrust of the 2014 Barron’s Roundtable . After a year that was brutal for all income-oriented investments, the panelists on Barron’s annual Roundtable — which include some real heavyweights such as Pimco’s Bill Gross, O.S.S. Capital’s Oscar Schafer, GAMCO Investors’ Mario Gabelli and Goldman Sachs’ Abby Joseph Cohen, among others — are broadly bullish on bonds.
BusinessWeek: – Bonds head to best start since ’08 in safety bid: credit markets. – The global bond market is poised for its best annual start since 2008 as investors seek havens amid turmoil in developing nations and weaker-than-forecast economic data from China to the U.S.
Forbes: – Banks’ retreat from the bond market means more risk for investors. – The financial crisis of 2008 taught many investors the concept of “liquidity risk.” Liquidity, in Wall Street jargon, is a measure of the ease with which something can be sold. Back in 2008, as asset prices plummeted, investors found that the banks that peddled stocks, bonds and even toxic waste were unwilling to buy them back. These banks broke their implicit agreement to make a market – that is, to always be available to buy and sell at a fair, market-clearing price. Investors were left holding the bag.
— PIMCO (@PIMCO) January 28, 2014
Bank CDS are wider on EM pullback but not far from multi-year lows. Spreads roughly half of late 2011 levels.
— AnthonyValeri (@Anthony_Valeri) January 28, 2014
Active 2yr was quite special today, trading -1%, putting the roll at 3.5% and WIs at 39bps.
— Ed Bradford (@Fullcarry) January 28, 2014
“Bond Squad is my favorite bond investing newsletter. It combines common sense with deep market knowledge.”
– Marc Prosser, Publisher of Learn Bonds
Bond Squad is more than just an investment newsletter! Paying subscribers can call-up bond market veteran trader and portfolio manager, Tom Byrne, for market advice and have him review their portfolio free of charge.
Get a free two-week, no commitment trial of Bond Squad by emailing Tom at email@example.com
Or learn more about Bond Squad’s clearly written, expert analysis, click here