PIMCO has come back to ETFs in a big way, launching three first-of-a-kind ETFs with its Californian neighbour Research Affiliates.
The three new funds will all be factor trackers. What makes them special however is that they will adjust their factor exposure to changing market conditions.

The funds are:
·      PIMCO RAFI Dynamic Multi-Factor International Equity ETF (MFDX)
·      PIMCO RAFI Dynamic Multi-Factor Emerging Markets Equity ETF (MFEM)
·      PIMCO RAFI Dynamic Multi-Factor U.S. Equity ETF (MFUS)

MFDX, MFEM and MFUS track indexes which are in turn composed of five sub-indexes. Each sub-index represents one of the five major factors: value, low volatility, quality, size and momentum.

Each factor will be assigned an equal 20% slice of the fund. The piece of pie each factor received will be rise and fall depending on how likely it is judged to outperform. A factor judged to be undervalued and likely to outperform will grow its slice; a factor though overvalued and likely to underperform will shrink its slice.

The prospectus is silent on what formula will be used to weigh tilts—i.e. what likelihood of outperformance equates to how much bigger slice of pie. It only says that it will use “recent and historical metrics to tilt toward factor portfolios which are particularly attractive”.

Franklin Templeton will be listing two actively managed municipal bond ETFs. Both will try to achieve gains through income yields and tax efficiency, rather than through rising asset prices.
The Intermediate Municipal Opportunities ETF (FLMI) will invest at least 80% of its assets in municipal bonds whose interest payments are not subject to federal income tax. FLMI can invest in any state or territories bonds, of any quality.
The Municipal Bond ETF (FLMB) is very similar, but takes a lower-risk approach. It will limit exposure to territories’ debts (Guam, Puerto Rico, Virgin Islands) to 20% and will invest at least 80% of its portfolio in investment grade bonds.