PIMCO Investments' Douglas M. Hodge on how to weigh the choice between ETFs and mutual funds for investors' portfolios.
We look at ETF's as just another means of access
into the capital markets for investors, and particularly with ETF's
it gives more opportunity for individual investors to gain access
into not only the capital markets but also can cause
style of active management. We wanna continue to go down
that path so that investors have a choice between a
mutual fund or an ETF. There are certain kinds of
investors who prefer mutual funds for certain reasons and others
who would prefer some of the attributes that an ETF
offers and we wanna be able to respond to both
of those sources of interest and demand for our products.
I wouldn't say that there's a structural advantage of one
versus the other. Obviously there's some clear attributes. In a
mutual fund for example you trade once a day at
this stated net asset value whereas an ETF has continuous
trading. ETF's in some dimensions can be a little bit
more tax-efficient than a mutual fund for individual investor. They
also just broadly the ETF marketplace allows advisors perhaps who
tailor portfolios for their clients with a little bit more
precision than a mutual fund would. So again there are
reasons and rationales for both mutual funds and ETF's and
there's certainly room in the marketplace for both structures.