PIMCO Total Return ETF (BOND) is celebrating its first birthday with one-year returns that have crushed its benchmark and the mutual-fund version which is also managed by Bill Gross.
Since its launch, BOND has posted a total return of 12.5% versus 3% for the Barclays Aggregate Bond Index. Remarkably, it has also significantly outpaced the $285 billion PIMCO Total Return Fund, which gained 7.6%, according to Morningstar.
BOND’s outperformance has left many investors scratching their head since the ETF and the mutual fund follow the same strategy, and both are overseen by bond guru Gross.
“When BOND was launched with about $100 million in assets, Bill Gross was able to start fresh with a brand-new portfolio. The recent outperformance shows how a highly skilled active manager can add tremendous value in a little portfolio. It pays to be small,” says Morningstar analyst Timothy Strauts.
BOND, which has an expense ratio of 0.55%, has quickly grown to the largest actively managed ETF with over $4 billion in assets.
The ETF has noticeably fewer holdings than PIMCO Total Return Fund.
“Because the ETF’s portfolio is relatively lean and nimble, PIMCO’s best individual bond ideas can make up relatively larger portions of BOND than PIMCO Total Return,” Strauts notes. “Effectively, the ETF is performing like Bill Gross’ ‘best ideas’ list.”
However, as BOND increases in size, he expects the outperformance versus the mutual fund to narrow.
PIMCO Total Return ETF
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- Bill Gross