Understanding the Pimco Income Strategy Fund II (PFN)

What this ETF is trying to do

The Pimco Income Strategy Fund II (PFN) 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 know the difference between "price return" and "total return."

• Price Return: This only tracks how much the share price has gone up or down.

• Total Return: This includes both the change in share price and the money paid out through distributions.

For PFN, the numbers show different trends depending on how much time has passed:

• Year-to-Date (YTD): The price return is approximately -16.67%. However, the total return is higher at approximately -8.68%.

• One Year: The price return was approximately -17.22%, while the total return was approximately -6.64%.

• Three Years: The price return was approximately -5.30%, but the total return was a positive 35.17%.

To visualize the price change, the estimated price from roughly one year ago was $7.55. The current price is $6.25.

Income and distribution explanation

This ETF focuses on providing cash to investors. The distribution yield is approximately 13.79%. This means the fund has paid out a significant amount of cash relative to its share price. These payments usually happen monthly, and over the last 12 months, there were 12 payouts.

It is important to remember that a high distribution yield does not mean you have earned that same amount in total profit. You must look at the total return 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. While a falling share price is not the same thing as NAV erosion, we use "erosion scores" to measure risk.

PFN has an erosion score of 55, which is labeled as "moderate price erosion." This indicates a moderate level of risk regarding how the price has moved over time.

Pros

• The fund offers a high distribution yield of approximately 13.79%.

• The three-year total return has been positive at approximately 35.17%.

Cons

• The share price has seen a decline recently, with a one-year price return of approximately -17.22%.

• The fund shows a moderate level of price erosion.

Beginner takeaway

When looking at funds like PFN, high cash payments (yield) can be helpful for income, but they do not guarantee that the share price will stay the same. Always compare the "price return" to the "total return" to see if the cash payments are helping to offset a falling share price.