PIMCO Total Return ETF (NYSEArca: BOND) skipper Bill Gross has an overweight position in municipal bonds relative to the fund’s benchmark index, which is helping the $3 billion exchange traded fund outperform this year.
At the end of September, BOND had 10% of its assets in municipal debt, compared with zero for the Barclays U.S. Aggregate Bond Index, according to data on PIMCO’s website.
The PIMCO ETF is also underweight U.S. Treasuries with a 4% allocation versus about 36% for the index.
Gross oversees the $278 billion PIMCO Total Return Fund as well as the ETF version, BOND. [PIMCO Total Return ETF Hits $3 Billion in Assets]
In the mutual fund, Gross is keeping his municipal-debt holdings at the highest since at least 2006 with the market on a pace to beat Treasuries for a second straight year, Bloomberg News reports.
The largest muni bond ETFs include iShares S&P National AMT-Free Municipal Bond (NYSEArca: MUB), Market Vectors High-Yield Municipal (NYSEArca: HYD), PowerShares Insured National Municipal Bond (NYSEArca: PZA), PowerShares Build America Bond (NYSEArca: BAB), SPDR Barclays Capital Municipal Bond (NYSEArca: TFI) and SPDR Nuveen Barclays Capital Short Term Municipal Bond (NYSEArca: SHM).