Pimco, the world’s largest manager of fixed-income assets, launched two more country-specific bonds funds—one targeting Germany and the other Canada—expanding its reach into developed economies that have weathered the global financial crisis relatively well.

Both the Pimco Canada Bond Index Fund (NYSEArca: CAD) and the Pimco Germany Bond Index Fund (NYSEArca: BUND) are first-of-a-kind funds with strategies that add a currency wrinkle to a portfolio of both government and private credits issued by different entities in the two countries. They each have a net expense ratio of 0.45 percent.

Earlier this month, Pimco rolled out the first of the three of what we’ve called “strong” country bond ETFs, the Pimco Australia Bond Index Fund (NYSEArca: AUD). The Aussie bond ETF invests in various types of investment-grade Australian debt, and allows investors to benefit from the strength of the Australian dollar against the U.S. currency.

Local-currency bond funds are in growing demand as investors look outside the U.S. for income opportunities. But they are still relatively new, and most of the assets are in global or regional funds focusing on the emerging markets. Thus, the developed-country focus of the Pimco funds makes the product offering more noteworthy.

Resilient Economies

Pimco’s funds focus on commodities-rich Canada and Germany’s resilient export-driven economy that have performed well in the face of an ongoing global economic crisis now in its fourth year.

Like Australia, the two countries have managed to thrive even as much of the rest of the developed world struggles with what increasingly looks like the worst economic slowdown since the 1930s.

“These new index ETFs are designed to help investors access select countries that may offer better risk-adjusted returns in this ‘New Normal’ environment,” Tammie Arnold, managing director and global head of Pimco’s ETF business, said in a press release earlier this month.

Pimco has described the current slow slog out of the market collapse of 2008-2009 as the new normal, a term that suggests that the current recovery will almost certainly be different than most recoveries in the postwar period that were characterized by relatively quick resumption of growth in the wake of interest-rate cuts by the central bank.

“The funds seek to optimize trade execution, reduce transaction costs and minimize tracking error by avoiding bonds that are hard to obtain or at high risk of near-term default, while emphasizing bonds which may provide liquidity and market access,” Pimco added in the release.

Both CAD and BUND will track BofA Merrill Lynch indexes that comprise locally issued debt. While most of each fund’s assets will be tied to their respective indexes, they will also own cash and investment-grade, liquid short-term instruments, forwards or derivatives.

The funds are designed to deliver dividends monthly.

Competitors

U.S. investors have yet to have access to Canada’s fixed-income space, and can only tap into Germany’s bond market through futures-based ETN strategies marketed by Invesco PowerShares and backed by Deutsche Bank.

The Australia-focused AUD has one almost-direct competitor, the WisdomTree Australia & New Zealand Fund (NYSEArca: AUNZ). The WisdomTree fund had $25.6 million in assets as of Nov. 9, according to data compiled by IndexUniverse.

As noted, Pimco’s Germany-focused fund has indirect competitors in the PowerShares DB German Bund Futures ETN (NYSEArca: BUNL) and the triple-long PowerShares DB 3X German Bund Futures ET (NYSEArca: BUNT).

The two ETNs have picked up $31 million and $33 million in assets, respectively, since their launch earlier this year.