Bill Gross’ recent unequivocal call for investors to dump some of the more popular bond ETFs in favor of his very own Pimco Total Return ETF (BOND) was something to behold, as this edited video makes perfectly clear.
Gross was the keynote speaker at IndexUniverse’s Inside Fixed Income conference, and covered a wide range of topics in his nearly hour-long appearance, including Pimco’s “new normal” thesis on how the developed world is in for a period of relatively slow growth, and how the Federal Reserve will extricate itself from the easy-money policies it has embraced since the economy collapsed in September 2008.
But his call for investors and advisors to exit holdings of the Vanguard Total Bond Market ETF (BND) and the iShares Barclays Aggregate Bond Fund (AGG) in favor of BOND was undoubtedly one of the highlights of the one-day conference.
“If you have clients in BND or AGG, get them over [to BOND],” Gross told the audience of financial advisors. “I don't care about the fees. Just bring them over because you'll be helping them out. I can't guarantee it … but I think it's a pretty good bet.”
Gross was referring to BOND’s relatively pricey expense ratio compared with the Vanguard and iShares ETFs he singled out. BOND costs 0.55 percent a year, while iShares’ AGG and Vanguard's BND cost 0.20 percent and 0.10 percent, respectively.
He said beating indexed bond funds is still achievable, but the task is growing harder as BOND grows bigger. The fund, which launched on March 1, 2012, is the second-fastest-growing ETF in history, after the SPDR Gold Shares (GLD), the $75 billion physical gold ETF.
“Their universe is basically a 40 percent Treasurys universe yielding 90 basis points. You can't produce return out of that type of yield,” Gross said, referring to BOND’s two competitors.
BOND has assets of $2.95 billion, while BND and AGG have $17.5 billion $15.6 billion, respectively, according to data compiled by IndexUniverse.
The Inside Fixed Income conference was held on Sept. 20 in Newport Beach, Calif., the same city where Pimco is based.
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