2024-04-24 15:27:15 ET
Summary
- PIMCO's corporate bond ETF seeks to provide optimized exposure to investment grade corporate bonds with excess yield relative to government securities.
- The fund has over 1,500 holdings, with a focus on investment grade corporate bonds, particularly BBB-rated credits, and has a 6.2 years duration.
- The ETF has performed similarly to the larger iShares iBoxx $ Investment Grade Corporate Bond ETF, with a slight outperformance due to lower duration.
- CORP has been hit hard in the past years by rising risk-free rates, but represents a viable investment choice in the intermediate portion of the yield curve to overlay corporate spread risk on risk-free rates.
Thesis
When thinking about investment grade corporate bond funds, the 800-pound gorilla in the room is the BlackRock iShares iBoxx Investment Grade Corporate Bond ETF ( LQD ), with assets under management exceeding $27 billion. However, there is an alternative available, this time coming from Pimco, in the form of the PIMCO Investment Grade Corporate Bond Index Exchange-Traded Fund ETF ( CORP ):
The fund seeks to provide optimized exposure to the broad investment grade corporate bond sector, before fees and expenses, which may provide excess yield relative to government securities, and might serve as a lower volatility corporate investment than equities. The PIMCO Indexing approach includes an optimization process that first applies liquidity/transaction cost filters to exclude bonds that are illiquid or cost prohibitive to trade and then attempts to match risk metrics --such as duration, market-weighted spread, and carry -- to those in the index.
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CORP: Pimco's Answer To An Investment Grade Corporate Bond Fund