PIMCO requests conversion of Mortgage-Backed Securities Fund into ETF

PIMCO has proposed the conversion of its first mutual fund into an ETF, the firm proposed to its board of trustees for Pimco Funds that it consider converting its $141mn Mortgage-Backed Securities Fund from a mutual fund into an ETF.

After recording outflows of $19mm in the twelve months ended the 31st of January, and having recorded outflows of over one million euros just during January (according to Morningstar), PIMCO is looking to spin its fund into an ETF in order to benefit its investors by reducing costs, including no 12b-1 fees, sales charges and 'other potential benefits'. At the moment, according to the prospectus, the fund charges between 1.12% and 2.27% depending on the share class.

PIMCO affirms that the ETF would be managed in a similar way to the fund and the conversion, if approved, would be completed by September the 20th. To receive shares of the proposed ETF, clients will need to have a brokerage account upon the date of the mutual fund’s potential conversion, as PIMCO said.

According too Morningstar Direct, Pimco's portfolio of mutual funds, posted $2.1 billion in inflows during the year ended 31st of January, while firm's ETF range saw $3.9 billion in inflows during the same period.

According to a recent report carried out by BNY Mellon, 44% of asset managers expect an uptick un funds to ETF conversion. Up-to-date 72 US mutual funds have already been converted into ETF.