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ETF Chart of the Day: PIMCO Total Return

tlydon@globaltrend.com (Tom Lydon)

PIMCO Total Return ETF (BOND - News) manager Bill Gross promised big things when the fund launched earlier this year, and the ETF has not disappointed.

In short order, the ETF has already attracted more than $1.7 billion in assets under management, including an impressive $200 million that entered the fund just last week.

And BOND, being an unabashedly “actively managed” ETF, the quick progress of the fund has turned heads on both the retail and institutional fronts as actively managed products have simply failed to become briskly embraced by investors until now, as a general rule.

Two months ago we highlighted BOND, noting encouraging early performance of the ETF versus its well known and established mutual fund version counterpart, the PIMCO Total Return (PTTAX).

This trend has certainly continued, as BOND has rallied an impressive 3.81% since inception in March of this year with PTTAX up only 1.99% during the same time period.

Currently, top holdings in BOND include U.S. Treasury Notes, FNMA (Fannie Mae) and SLMA (Sallie Mae Student Loan) obligations, as well as FHLMC (Freddie Mac) securities, and the fund charges what we believe is a generous 0.55% expense ratio.

In the world of actively managed mutual funds, and much less actively managed ETFs, where the ultimate goal of the product is to deliver alpha to some stated benchmark, we find that expense ratios on similar products to BOND typically range well north of 1%.

Last week’s asset inflows in BOND are certainly encouraging not only to PIMCO, but to other asset management companies such as AdvisorShares, whom are pioneers in “Actively Managed ETFs” as well as those investment advisors whom have been waiting for the active ETF phenomenon to take off.

Thus, we will monitor this situation intently throughout the rest of the summer and the remainder of 2012, as a sea change may certainly be underway not only in fixed income, but in the ETF industry in general.

PIMCO Total Return ETF

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