PIMCO is set to launch an exchange traded fund version of the $250 billion mutual fund, PIMCO Total Return Fund, on Thursday, March 1. The move will be watched closely by investors interested in the varying performances.
“First of all, right now in the prospectus, the ETF doesn’t have the allowance to get any derivative exposure, which Bill Gross has used extensively in his other fund to make some bets because of the liquidity of those contracts. So, that’s going to one difference, ” Paul Justice said in a Morningstar interview. [All Eyes on PIMCO Total Return ETF Launch]
The new ETF will list on the NYSE Arca with the same investment goals as its mutual fund predecessor. The catch will be that the ETF will not be allowed to hold some derivatives such as futures, options and swaps. It will, however, be able to invest in currency forwards. Some derivatives are used in the mutual fund version to express positions in the currency and bond market, reports Ari I. Weinberg for Forbes.
Investors will be noting the absence of derivatives in the ETF version and over the first few weeks of trading the influence of these hybrid investment tools will become evident. According to Morningstar, the mutual fund has the largest asset pool to date, thanks to its unrivaled performance.
Some say the Total Return Fund may be more complimentary in an active ETF form, because it invests in liquid bond markets. The necessity to reveal holdings on a daily basis will prove interesting for the ETF version. [PIMCO ETF Puts Spotlight on Mutual Fund Fees]
“Active ETFs may have some application when it is less about a basket of stocks but more about a macroeconomic view or an investment philosophy encapsulated into a product,” Ben Phillips of Casey Quirk, said. These types of investments can allow an investor to bet on a certain view on the future of an economy or the direction of a currency. [Three Things You Need to Know About Active ETFs]
The ticker for PIMCO Total Return ETF will be TRXT.
Tisha Guerrero contributed to this article.
Story updated to correct ticker for PIMCO Total Return ETF. Story also corrected to reflect the ETF will be able to invest in currency forwards.