Summary
LONZ Chart
LONZ: Highest-Yielding, Best-Performing Senior Loan ETF, But Better Choices Out There
The PIMCO Senior Loan Active Exchange-Traded Fund ETF is an active senior loan ETF managed by PIMCO. The fund provides diversified exposure to these high-yield investments, with an 8.6% dividend yield, and a 7.3% yield to maturity. It has outperformed most other senior loan ETFs since inception, with spottier performance relative to higher-yield CLO ETFs.
LONZ: The Reward Is Not Commensurate With The Risk (Rating Downgrade)
Downgrade LONZ to 'Sell' as the current 6.11% yield is insufficient for single-B risk in today's macro environment. Fund's low historical drawdown (-4%) may not hold in a recession; expect up to -10% downside in economic contraction. High expense ratio and floating rate sensitivity mean yields will drop further when the Fed cuts rates, worsening risk/reward.
LONZ: Lower Fed Funds Make This Name A Hold (Rating Downgrade)
We are downgrading the PIMCO Senior Loan Active Exchange-Traded Fund to 'Hold' due to ongoing monetary easing and decreasing yields. The Fed's rate cuts have significantly lowered the yield curve, impacting LONZ's dividend yield, which is set to decline further. The Fund's overweight position in single-B credits, combined with historically low credit spreads, presents heightened risk in a potential recessionary scenario.
PIMCO Senior Loan Active Exchange-Traded Fund Investors
| Name | Quantity | Cost | Value | Profit ($) | Gain (%) |
|---|---|---|---|---|---|
| JD Jim Dushek HARBOUR INVESTMENTS Inc. | 5,793 | $296,369.88 | $284,957.67 | -$11,412.21 | -3.85% |
| NCG Nathan C. Goodman Family Investment Center Inc. | 4,073 | $208,293 | $200,371.23 | -$7,921.77 | -3.8% |
| JF Joshua Frierdich Mid-American Wealth Advisory Group Inc. | 87,606 | $4.46M | $4.31M | -$151,579.03 | -3.4% |
| RW Roger Wittlin Roger Wittlin Investment Advisory LLC | 60,842 | $3.1M | $2.99M | -$110,946.46 | -3.57% |
| EM Erin Mccann Simplicity Wealth LLC | 51,087 | $2.6M | $2.51M | -$91,764.14 | -3.52% |
PIMCO Senior Loan Active Exchange-Traded Fund (LONZ) FAQ
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PIMCO Senior Loan Active Exchange-Traded Fund Profile
| ARCA Exchange | US Country |
Overview
The fund is designed with a strategic focus on Senior Loans, emphasizing a diversified portfolio as its foundation. It aims to meet its investment objectives by allocating at least 80% of its assets towards Senior Loans, where such investments might also involve the utilization of forwards or derivatives like options, futures contracts, or swap agreements for representation. This strategy is underpinned by a commitment to aligning the fund’s average portfolio duration closely with that of the Markit iBoxx USD Liquid Leveraged Loan Index, maintaining a variance of plus or minus one year from this benchmark. The dual emphasis on both diversification within the Senior Loans space and adherence to an indexed duration measure showcases the fund’s balanced approach towards leveraging potential market opportunities while managing associated risks.
Products and Services
- Senior Loans Investments
The cornerstone of the fund's investment strategy, focusing on a diversified selection of Senior Loans. By investing a significant portion of its assets in this area, the fund aims to capitalize on the attractive income potential and relative security offered by Senior Loans. This approach is crafted to provide investors with a balance of income generation and risk mitigation, leveraging the typically higher priority of senior loans in a company's capital structure.
- Forwards and Derivatives
In addition to direct investments in Senior Loans, the fund also engages in forwards or derivatives such as options, futures contracts, or swap agreements. These financial instruments are used either to represent investments in Senior Loans or to achieve the fund's investment objectives through alternative strategies. This method allows for greater flexibility in portfolio management, enabling targeted investment approaches and the potential for risk management and returns enhancement.
- Portfolio Duration Management
The fund prioritizes maintaining its average portfolio duration within a specific range relative to the Markit iBoxx USD Liquid Leveraged Loan Index. This commitment to closely tracking the index's duration underscores the fund's strategic focus on aligning its interest rate risk profile with that of the benchmark. By managing the portfolio’s duration in this manner, the fund aims to optimize its sensitivity to interest rate movements, thereby carefully balancing its risk and return objectives within the framework of its overall investment strategy.
