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Market Overview

ETFs Bill Gross Might Like (BONO, HDV, PBJ)


By now, most investors know that an official Bill Gross ETF exists. That fund, the PIMCO Total Return ETF (NYSE: BOND), debuted in late February as the ETF equivalent of PIMCO's popular Total Return Mutual Fund.

In just four months of trading, BOND has amassed over $1.6 billion in assets under management, according to PIMCO data, making it by far the most successful new ETF to come to market this year.

Beyond BOND, there are some ETFs on the market today that PIMCO's founder, managing director and co-CIO might be interested in. His recent investment insights piece stops short of naming specific investment opportunities. Rather, the piece focuses more on broad themes, but those that can read between the lines will be able to build an ETF portfolio that might just impress Gross himself. Here are some ideas:

Market Vectors LatAm Aggregate Bond ETF (NYSE: BONO) In his piece, Gross said Bond investors "should favor quality and 'clean dirty shirt' sovereigns (U.S., Mexico and Brazil)". BONO helps accomplish that objective as Mexico and Brazil combine for about 53 percent of the fund's weight.

Investors should note that BONO tracks an index composed of external and local currency Latin American sovereign debt, as well as the external debt of non-sovereign Latin American issuers denominated in dollars or euros. On Moody's scale, most of BONO's issues are non-investment grade, but on the Standard & Poor's ratings system, most of the fund's holdings are rated investment-grade.

BONO has a trailing 12-month yield of 5.79 percent and pays a monthly dividend. Other countries featured in the ETF include Venezuela, Colombia and Peru.

WisdomTree Emerging Markets Corporate Bond Fund (NASDAQ: EMCB) The WisdomTree Emerging Markets Corporate Bond Fund is the first ETF to offer investors exposure to emerging market corporates. It is also one of the more successful new ETFs of 2012. EMCB has almost $60 million in AUM following its March debut. That may not sound like much compared to BOND, but the WisdomTree offering does not have the benefit of Bill Gross being attached to it.

Gross does not specifically mention corporate debt in his most recent insights piece, but EMCB does devote more than 38% of its weight to Brazil and Mexico. The fund's holdings are dollar-denominated. With an effective duration of 6.26 years, EMCB features a distribution yield of 5.03 percent.

iShares High Dividend Equity Fund (NYSE: HDV) Gross said "Equity investors should likewise favor stable cash flow global companies and ones exposed to high growth markets." Most of HDV's lineup of 76 of U.S.-bases blue chips fit the bill as stable cash flow businesses. HDV's trailing 12-month yield of 2.53 percent is not overwhelming and is barely higher than what one would get with the SPDR Dow Jones Industrial Average (NYSE: DIA).

On the upside, HDV has a beta of just 0.35 against the S&P 500. In the past year, HDV is up 13.6 percent compared to 4.1 percent for the S&P 500.

PowerShares Dynamic Food & Beverage Portfolio (NYSE: PBJ) This pick might have some scratching their heads, but remember what Gross said "Equity investors should likewise favor stable cash flow global companies and ones exposed to high growth markets." Coca-Cola (NYSE: KO),Yum Brands (NYSE: YUM) and Kraft (NYSE: KFT) are stable companies with significant global footprints, while General Mills (NYSE: GIS) has been expanding its ex-U.S. presence for several years. That quartet combines for just under 20% of PBJ's weight.

For more on dividend ETFs, click here.


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