Pimco's Total Return ETF even better than the real thing

Pimco's Total Return ETF even better than the real thing
Bill Gross Lite outstripping flagship Total Return mutual fund by almost 300 basis points
JUN 06, 2012
It's probably no surprise that the intermediate-term bond fund that has performed the best since March 1 is managed by Bill Gross. But it isn't his flagship Pimco Total Return Fund Ticker:(PTTAX) that's sitting atop the performance charts. Instead, it's the exchange-traded-fund version that's trouncing the competition — including its mutual fund sibling. Since the Pimco Total Return ETF Ticker:(BOND) was launched on March 1, it has had a return of 4.14%, while the mutual fund version has had a return of 1.17%. The Barclays Aggregate Bond Index, the traditional benchmark for intermediate-term bond funds, has returned 0.03% over the same time period. The secret to the ETF's success is simple. At a little over $800 million, the ETF is free to invest in Mr. Gross' best ideas — and only those — while the mutual fund, with $258 billion in assets, is forced to invest more broadly. “It's a high-conviction portfolio,” said Scott Burns, director of ETF research at Morningstar Inc. The smaller size of the ETF also allows it to trade more opportunistically with single issues, Mr. Burns said. The massive size of the mutual fund forces it to invest through swaps and derivatives to access fixed-income markets without moving the markets. The ETF also sports a 0.55% expense ratio, 45 basis points cheaper than the retail share class of the mutual fund. Investors already are taking notice. The Pimco Total Return ETF has grown to $800 million in assets in just over two months. Despite the ETF's performance, it's probably not tax-efficient to sell your Total Return mutual fund shares in exchange for shares of the ETF. It should give advisers something to think about, however, when investing their next $1 with Mr. Gross.

Latest News

FINRA fines Vanguard $950,000 over decade of cost basis errors
FINRA fines Vanguard $950,000 over decade of cost basis errors

Faulty Forms 1099 and account statements reportedly left some Vanguard brokerage customers overpaying or underpaying taxes for over a decade.

More ETFs, more opportunity, more homework
More ETFs, more opportunity, more homework

The democratization of ETFs cuts both ways

Advisor moves: Raymond James, Baird add significant teams in latest recruiting push
Advisor moves: Raymond James, Baird add significant teams in latest recruiting push

Independent broker-dealers snap up experienced advisors as competition for established practices intensifies.

Wells Fargo names COO Scott Powell as its next chief risk officer
Wells Fargo names COO Scott Powell as its next chief risk officer

Derek Flowers, a nearly 30-year veteran, is set to retire in mid-January, handing the reins to the executive who helped lead the bank's regulatory turnaround.

Ameriprise runs advisor ads on ESPN, Golf Channel, CBS
Ameriprise runs advisor ads on ESPN, Golf Channel, CBS

The campaign spans broadcast TV and streaming, as the brokerage faces slowing client net flows and an $8.1 billion advisor team that left to launch an RIA this month.

SPONSORED In the Age of AI, Trust Becomes the Advisor's Greatest Asset

As AI makes financial information more accessible than ever, Lana Hock explains why human judgment, trust, and empathy remain the qualities clients value most in a financial advisor

SPONSORED Direct indexing webinar targets tax-loss harvesting amid market swings

Northern Trust’s Ken Lassner shows advisors how to convert volatility into after-tax portfolio gains