Gross loses top ETF spot

Total Return exchange-traded fund eclipsed by Pimco's Enhanced Short Maturity offering

Sep 5, 2013 @ 3:24 pm

By Jason Kephart

When Bill Gross announced the launch of the exchange-traded version of the Pimco Total Return Fund, he had his sights set on it becoming the biggest ETF in the world.

Thanks to interest rate blues, it isn't even the biggest ETF at his company now.

This week the $4.09 billion Pimco Enhanced Short Maturity ETF (MINT), an ultrashort-bond ETF, surpassed the $4.06 billion Pimco Total Return ETF (BOND) to become the biggest actively managed ETF as investors clamor for the safety of bonds less sensitive to rising long-term interest rates.

Before the Total Return ETF's March 2012 launch, Mr. Gross had predicted that it would grow to be bigger than the then $95 billion SPDR S&P 500 ETF (SPY), the largest ETF.

“We're working with very large expectations here,”he said during a January 2012 ETF conference.

Of course, that was before rising rates started causing headaches across the bond universe.

Since long-term rates began to rise in May, investors have pulled out $858 million from the Total Return ETF and added $1.4 billion to the Enhanced Short Maturity ETF, according to IndexUniverse LLC.

“With massively rising interest rates, even a good bond manager is going to have trouble creating positive performance in this environment,” said Timothy Strauts, an analyst at Morningstar Inc.

The Pimco Total Return ETF has lost 3.23% this year. Over the same time period, the Enhanced Short Duration ETF is basically flat.

With the 10-year Treasury bond's interest rate hovering near 3%, Mr. Gross himself is advocating shorter bond durations.

“If unemployment and inflation rates can be at least closely guesstimated, then front-end yields become the most reliable bet in the ballpark,” he wrote Thursday in his most recent investment outlook.

The $800-plus million that has been pulled from the Total Return ETF is just a drop in the bucket compared with the $26 billion that investors have pulled from the Pimco Total Return mutual fund (PTTAX) since May, according to Morningstar.

Between the outflows and losses from rising rates, the $251 billion mutual fund has shed $41 billion, or 14% of its assets, over the past four months.

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

Featured video

INTV

Children of AI, and when they are coming to financial advice

Technology reporter Ryan Neal talks about the tremendous progress in artificial intelligence in other industries, and how its applications are slowly making headway in the advice sector.

Latest news & opinion

SEC advice rule hearing updates

Commission says a lot of work ahead, public will have 90 days to comment.

SEC advice proposal unveiling: Here's what to expect

Chairman Jay Clayton will initiate momentous action Wednesday, as the commission meets to debate a rule on broker and adviser standards.

How active are the largest actively managed funds?

Active-share measures for the 15 largest actively traded mutual funds.

Morgan Stanley's success looks long in the tooth to analyst

Sanford C. Bernstein & Co. analyst Christian Bolu, concerned over stalled adviser growth and what it means for lending and deposit growth, believes the stock will "under perform."

Retirement coverage gap, 401(k) rollovers are big emerging threats for plan advisers

Proliferation of state retirement programs approaching the 'tipping point' where it will lead the federal government to step in.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print