(February 12, 2013) — Pacific Investment Management Co (PIMCO) will soon be launching an actively managed currency exchange-traded fund, citing demand from investors who are concerned about a devalued US dollar.
The launch will target currencies outside of the United States, the firm said in a statement. It will also compete against several other ETFs, such as those offered by WisdomTree and ProShares, which buy foreign currency and debt.
According to the investment giant, the PIMCO Foreign Currency Strategy Exchange Traded Fund–whose ticker symbol will be FORX–will hold currencies and bonds issued in local currencies. The new ETF will be managed by Scott Mather, managing director and head of global portfolio management; Vineer Bhansali, managing director and head of quantitative investment portfolios; and Thomas Kressin, senior vice president and head of European foreign exchange.
According to the prospectus, the fund’s managers will chose currencies based on relative interest rates, inflation rates, exchange rates, monetary and fiscal policies, trade and current account balances, legal and political developments, and other specific factors.
McKinsey & Co. recently predicted that actively managed ETFs will grow to $500 billion, up from $10 billion, largely due to big brands’ getting more involved in the space.
PIMCO’s ETF rollout also comes after research from data monitor Markit showed in August that investors are piling assets into passive investment vehicles that are designed to make money when markets decline. Markit noted that “Two asset classes have seen a net increase in funds managed. Fixed income funds have seen net fund inflows of $1.1 billion. Equity ETFs saw the largest increase in funds managed with a $1.3 billion of net inflows taking their aggregate assets under management to $15.2 billion. Overall equity ETFs are the most popular with investors, attracting $15 billion of the $24 billion of assets invested in inverse ETFs.”
Markit’s research continued: “Of the equity short ETFs, North American funds dominate the assets under management with two thirds of the total funds, followed by European short funds and globally exposed funds which respectively have $3.3 billion and $924 million under management.” The research added that European exposed funds saw the largest inflows with $689 million followed by North America which saw $643 million of net inflows.