The new mutual funds will cover large and small stocks from the U.S. and worldwide, including emerging markets, according to a statement Thursday from PIMCO and Research Affiliates. Mr. Arnott's firm has developed an enhanced indexing methodology that picks and weights securities based on fundamental factors rather than market value.
“It falls neatly between those investors who have made a decision to invest in a passive approach and yet this avoids the inefficiencies of passive investing,” Douglas Hodge, PIMCO's CEO, said in a telephone interview. “It's been a proven winner.”
PIMCO, best known for bond funds, started pushing into equities about five years ago to reduce its reliance on fixed-income investing. Michael Diekmann, CEO of PIMCO parent Allianz SE, said in 2013 that the bond manager's expansion into stocks was proving more difficult than expected.
PIMCO, which oversaw $1.87 trillion as of Sept. 30, is diversifying as investors seek alternatives to fixed income because of concern that the three-decade bond rally might end. The firm is also seeking to stem record redemptions after the abrupt departure of co-founder William H. Gross, who joined Janus Capital Group three months ago.