U.S. Markets closed

Cash Influx May Cool PIMCO Total Return ETF’s Outperformance


The PIMCO Total Return ETF (BOND) captained by Bill Gross has grown to the largest actively managed exchange traded fund, gathering $4.5 billion since its March 2012 launch. As the ETF continues to grow in size, analysts are warning investors to temper their performance expectations after BOND blew away its benchmark and mutual-fund counterpart during its first year.

The PIMCO ETF has posted a total return of 11.1% for the trailing year, compared with 2.9% for the Barclays Aggregate Bond Index and 7.1% for the institutional share class of PIMCO Total Return Fund. The venerable mutual fund has nearly $290 billion in total assets under management.

BOND’s stellar performance with Bill Gross at the controls of a nimble ETF “has brought in a ton of new money, signaling it may be too late to jump on this bandwagon,” reports Ryan Derousseau for Money Magazine.

Gross told the magazine even he was surprised at PIMCO Total Return ETF’s incredible start. “Investors should know that the past few months probably won’t be replicated,” he said.

“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. [PIMCO Total Return ETF Trounces Benchmark, Mutual Fund in First Year]

“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.

BOND holds less than 1,000 securities versus over 20,000 for PIMCO Total Return Fund, according to the Money Magazine report.

The ETF carries an expense ratio of 0.55%. Institutional shares of PIMCO Total Return Fund have operating expenses of 0.46% while the A shares charge 0.85%.

PIMCO Total Return ETF


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.