Understanding the PIMCO Multisector Bond Active ETF (PYLD)

What this ETF is trying to do

The PIMCO Multisector Bond Active ETF (ticker: PYLD) is an exchange-traded fund that focuses on different types of bonds. It trades on the NYSE.

What the numbers show

When looking at an ETF, it is important to know the difference between price return and total return. Price return only tracks how much the share price changes. Total return includes both the price change and any cash payments (distributions) made to investors.

Here is what the data shows for PYLD:

• Year-to-Date (YTD): The price return is approximately -5.43%. However, the total return is -1.13%.

• One Year: The price return was approximately -5.65%. The total return was approximately 0.54%.

• Three Years: The price return was approximately 4.65%, while the total return was much higher at approximately 25.92%.

To visualize the price change, we can look at an estimated price from roughly one year ago. The estimated price was $26.74, and the current price is $25.23.

Income and distribution explanation

Some investors look for ETFs that pay out cash regularly. This is called the distribution yield. For PYLD, the distribution yield is approximately 6.65%. This means the fund has paid out a significant amount of cash relative to its price.

The fund usually pays distributions monthly, and it has made 13 payments over the last 12 months. It is important to remember that a high yield does not guarantee you will make money overall; you must look at the total return to see the full picture.

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 does not always mean the NAV is eroding, we use an erosion-risk score to measure this risk.

PYLD has an erosion score of 75, which is labeled as "Mild price erosion." This is considered a mild level of risk. There is no severe erosion-risk flag for this ETF.

Pros

• Higher Total Returns: Over a three-year period, the total return (25.92%) was significantly higher than the price return (4.65%), showing the impact of distributions.

• Regular Income: The fund provides a distribution yield of approximately 6.65%.

Cons

• Price Declines: The share price has seen declines both year-to-date and over the last year.

• Mild Erosion Risk: The fund has a score indicating mild price erosion.

Beginner takeaway

When studying PYLD, remember that the share price and the total return tell different stories. While the share price has gone down recently, the total return (which includes cash payments) tells you how much value was actually created or lost including those payments. Always look at the total return to understand the full performance of an income-focused ETF.