Pimco Total Return ETF is Crushing the Mothership!
- Joshua M Brown
- May 15th, 2012
Well wouldn’t you know it, the Pimco Total Return ETF ($BOND) is 300 basis points ahead of the original Pimco Total Return mutual fund (aka the World’s Largest Fund)…
From Investment News:
Since the Pimco Total Return ETF (BOND) was launched on March 1, it has had a return of 4.14%, while the mutual fund version has had a return of 1.17%. The Barclays Aggregate Bond Index, the traditional benchmark for intermediate-term bond funds, has returned 0.03% over the same time period.
The secret to the ETF’s success is simple. At a little over $800 million, the ETF is free to invest in Mr. Gross’ best ideas — and only those — while the mutual fund, with $258 billion in assets, is forced to invest more broadly.
“It’s a high-conviction portfolio,” said Scott Burns, director of ETF research at Morningstar Inc.
So, because it’s smaller, Bill Gross can do the things he used to do in order to raise all that money into Total Return in the first place? So it’s like Gross as a younger, hungrier, more nimble bond manager?
OK, that’s cool. Now granted, we’re talking about less than a full quarter’s worth of returns here, so let’s not slather butter and salt on this thing and start licking it just yet. But it’s still a fascinating concept. When I predicted the Death of Mutual Funds in Fortune Magazine, this is an angle I’d never even considered – “What if the ETF versions of popular funds have better performance?” – I was more hung up on the structures themselves.
Disclaimer: I am not currently invested in the BOND ETF and my commentary above is not an endorsement or a solicitation of any kind, it is for informational purposes only.
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The Reformed Broker is a blog about financial markets and the economy. Joshua Brown is a New York City-based investment advisor for high net worth individuals, charitable foundations, retirement plans and corporations... More.