With the exchange traded fund industry now accounting for a $1.2 trillion market, traditional fund providers are stepping up their game within the ETF space or risk getting left in the dust.
For instance, PIMCO has adapted its actively managed portfolios to fit within an ETF structure, reports Ari I. Weinberg for The Wall Street Journal.
Morningstar analyst Eric Jacobson sees PIMCO’s entry into the ETF space as “constructive paranoia” – the company wants to aggressively position itself in the active ETF space as investors add more fixed-income ETFs into their portfolios.
PIMCO’s highly successful Pimco Total Return ETF (NYSEArca: BOND) outperformed the $270 billion Total Return Institutional (PTTRX), providing 8.1% total return on net asset value through July 31, compared to the 4.6% on the flagship fund. Since BOND’s launch in March, the ETF has attracted over $2 billion in assets. [PIMCO Total Return ETF, Fund Rake In Cash]
The smaller, more nimble BOND ETF has been able to take on outsize purchases that wouldn’t be possible in the original Total Return Fund. For instance, the ETF recently had 10.5% in Mexican government debt, which wasn’t feasible in the larger version. Additionally, the actively managed ETF may not use derivatives due to a regulatory ban.
BOND has a 0.55% expense ratio, compared to the 0.85% fee on the Total Return A-class shares.
PIMCO sees ETFs “as another means to provide individual investors access to Pimco’s thinking, strategy and active management,” Chief Operating Officer Douglas M. Hodge said in the article.
The firm is also considering ETF versions of the Real Return Fund (PRTNX), Low Duration Fund (PTLAX) and Diversified Income Fund (PDVAX).
For more information on the ETF industry, visit our current affairs category.
Max Chen contributed to this article.