PIMCO Total Return ETF Slipping Against Index as Rates Rise

ETF Trends

Up until the past two months, PIMCO Total Return ETF (BOND) manager Bill Gross was treating the Barclays Aggregate Bond Index like his own personal punching bag.

However, the active ETF’s performance edge versus the benchmark has been slipping a bit recently as Treasury yields rise.

Gross also manages the $285 billion PIMCO Total Return Fund, which is lagging most of the largest U.S. bond mutual funds for the year, according to Bloomberg News.

BOND is the ETF version of PIMCO Total Return Fund that was launched in March 2012.

“As interest rates have climbed over the past two months, Gross has recommended buying U.S. Treasuries,” Bloomberg reports, adding that PIMCO Total Return also has a longer duration than rival funds.

The portfolio holdings of BOND and PIMCO Total Return Fund don’t always line up exactly. For example, at the end of May, the mutual fund had 37% in Treasuries, compared with 31% for the ETF, according to PIMCO.

BOND is down 3.7% for the trailing month, while the Barclays Aggregate Bond Index is down 2.3%, according to Morningstar.

The ETF’s performance is inline with the benchmark year to date, with BOND down 2.5% versus a 2.3% decline for the index.

However, for the trailing 12 months, the ETF managed by Bill Gross remains comfortably ahead. BOND is up 2.9% while the Barclays Aggregate Index is down 0.5%, according to Morningstar data.

The chart below shows the relative performance of BOND versus iShares Core Total U.S. Bond Market ETF (AGG), which tracks the Barclays Aggregate Bond Index.

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The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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