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Eaton Vance Tries to Get a Piece of the Stimulus Action

Plus, PIMCO investment process patent pending, and more.

Morningstar Analysts, 09/14/2009

Morningstar's fund analysts cover 2,000 mutual funds. Their full analyst reports, including Stewardship Grades, are available in Morningstar Principia Mutual Funds Advanced and Morningstar Advisor Workstation Office Edition.

Eaton Vance plans to launch a fund that gives investors a way to buy bonds issued to fund economic stimulus projects.

Build America Bonds are taxable municipal bonds that carry special tax credits and federal subsidies. They were created when President Obama signed the recent economic stimulus bill into law. Because of these subsidies, issuers are often able to offer higher coupon payments than they otherwise would be able to. From April 15, 2009, through August 2009, a total of $28.2 billion of these bonds have entered the market according to Barclays Capital. The provision is set to expire at the end of 2010.

With limited supply and time running out to purchase new issues, it is notable that Eaton Vance is rolling out a new fund that will invest at least 80% of its assets in these bonds. However, they will not be the only managers trying to scoop these issues up. Miriam Sjoblom, Morningstar associate director of fund analysis, notes that other diversified taxable-bond managers have been buying the bonds, often finding them attractive relative to other issues. A prominent example is the team in charge of Dodge & Cox Income DODIX. They noted in a recent shareholder letter they found some of the bonds to be "a compelling investment opportunity to the investor with a long-term horizon."

PIMCO Investment Process Patent Pending
Can you patent a fund's strategy? That is the question patent examiners will have to answer now that PIMCO, a unit of Allianz AZ, has filed for a patent on two new managed-payout funds: PIMCO Real Income 2019 and PIMCO Real Income 2029. The two funds use a "laddered" portfolio of Treasury Inflation-Protected Securities, meaning maturities are structured over a predetermined time frame to generate systematic, inflation-adjusted distributions. The firm believes this strategy is unique enough to warrant patent protection. The funds are intended for retirees who require predictable income distributions.

If PIMCO is successful, no other fund will be able to use the strategy without licensing permission from the company.

Artio Continues with Plans for U.S.-Based IPO
On Wednesday, Swiss bank Julius Baer Holding Ltd. said it will commence its long-awaited plans for an initial public offering of its asset-management business, Artio Global Investors Inc., which in which has been under discussion for more than a year.

The move comes as Julius Baer splits the firm's private banking operations from its asset-management business. The offering is expected to be priced and completed by the end of September, and shares will trade on the New York Stock Exchange under the symbol ART.

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