PIMCO Introduces TIPS ETF
August 28, 2009

SAN DIEGO (ETFguide.com) - PIMCO this week launched a new exchange-traded fund (ETF) focused on Treasury Inflation-Protected Securities (TIPS).

The PIMCO 1-5 Year U.S. TIPS Index Fund (NYSEArca: STPZ) is the first in a lineup of three TIPS ETFs that PIMCO is launching to expand the range of products available to investors looking to protect against inflation. The funds will be managed by PIMCO Managing Director and Portfolio Manager Vineer Bhansali.

STPZ is concentrated on the short-term maturity segment of the TIPS market and aims to offer investors a high degree of protection against the immediate effects of inflation on their portfolio. Shorter-dated TIPS have historically shown a significantly higher correlation with current inflation and lower volatility relative to an index that covers the entire TIPS maturity spectrum. The fund's benchmark is the Merrill Lynch 1-5 Year US Inflation-Linked Treasury Index.

"Inflation-hedging should play a strategic role in investors' asset allocation, particularly as we head toward a ‘New Normal' where lower growth, increasing U.S. government debt and unprecedented fiscal stimulus could over time raise the potential for higher price pressures than have been seen in recent decades," said Mr. Bhansali.

In addition to providing inflation protection, TIPS are U.S. Government-issued fixed-income securities that are backed by the full faith and credit of the U.S. government for timely payment of interest and principal. The principal value of TIPS is adjusted monthly according to the rate of inflation measured by the U.S. consumer price index.

In early September, PIMCO plans to launch two additional TIPS ETFs that aim to fill out the lineup of inflation-fighting investments. The PIMCO 15+ Year U.S. TIPS Index Fund (Ticker: LTPZ) will focus on long-dated TIPS that are effective in hedging long-term spending needs against interest rate and inflation risks. The PIMCO Broad U.S. TIPS Index Fund (Ticker: TIPZ) will give investors the combined benefits of TIPS exposure across the maturity spectrum.