PIMCO (PIMCO news) recently launched its Investment Grade Corporate Bond Index Fund (CORP), an ETF that tracks broadly the Bank of America Merrill Lynch US Corporate Index with a novel optimization aspect that seeks to weed out some securities. The fund is managed by Vineer Bhansali, managing director.

The new fund seeks to optimize trade execution, reduce transaction costs and minimize tracking error by avoiding bonds that are hard to obtain or at high risk of near term default, while emphasizing bonds that may provide liquidity and market access. 

Some have noted however that this has resulted in a much less diversified portfolio. Dow Jones notes that the iShares iBoxx Investment Grade Corporate Bond ETF (LQD) is built on an index encompassing more than 500 bonds. The new PIMCO ETF tracks less than 50. That may be all the diversification an investor needs, however.

"PIMCO certainly has the resources to provide a bit more hand holding from its managers than a fund which uses some sort of computer-based methodology. But with an expense ratio of 0.20 percent, how much hands-on support can you really expect to get" says Barrons.

"The bottom line: PIMCO still lists CORP as a passively managed fund. It's 'smart passive' approach is a unique and interesting strategy, but how much value it can add over other quant-like or active corporate bond ETFs is something only time will tell," notes Barron's.

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