Understanding the Pimco Income Strategy Fund (PFL)

What this ETF is trying to do

The Pimco Income Strategy Fund (PFL) is an exchange-traded fund (ETF) listed on the NYSE. This specific fund uses options to help generate income for its investors.

What the numbers show

When looking at an ETF, it is important to separate "price return" from "total return."

• Price Return: This measures only how much the share price has changed. For PFL, the year-to-date (YTD) price return is approximately -17.79%. The one-year price return is approximately -18.37%, and the three-year price return is approximately -8.94%.

• Total Return: This measures the overall change, including the money paid out to investors. PFL's YTD total return is approximately -9.86%, and its one-year total return is approximately -7.86%. Interestingly, the three-year total return is positive at approximately 29.99%.

To visualize the price change, the estimated price from roughly one year ago was $8.49. The current price is $6.93.

Income and distribution explanation

This ETF focuses on providing cash to investors. The distribution yield is approximately 14.09%, which describes the cash distributions relative to the current ETF price. These payments happen frequently; the fund usually pays out monthly, with 12 payouts recorded over the last year.

It is important to remember that a high distribution yield does not mean you earned that same percentage as your total return. You must look at the total return figure to see how the investment performed overall.

NAV erosion explanation

"NAV erosion" is a term used to describe when the value of the underlying assets in a fund decreases. StockValueFinder uses an "erosion score" to measure this risk. PFL has an erosion score of 55, which is labeled as "moderate price erosion." While the share price has declined, this score is a measurement of risk rather than a guarantee of how the fund's value will behave in the future.

Pros

• The fund provides a high distribution yield of approximately 14.09%.

• It has a strong three-year total return of approximately 29.99%.

• It offers regular income, usually on a monthly basis.

Cons

• The share price has seen significant declines recently (the one-year price return is approximately -18.37%).

• The fund has a moderate erosion-risk score.

Beginner takeaway

When looking at funds like PFL, high yields can be eye-catching, but they do not tell the whole story. An investor should look at both the price return (the cost of the shares) and the total return (the price change plus the cash received) to understand how the fund is performing.