Will PIMCO ETF Mark Beginning of the End for Mutual Funds? | ETF Trends

The launch of PIMCO Total Return ETF next month could represent a major turning point for traditional mutual funds.

PIMCO is introducing an exchange traded fund clone of the world’s largest mutual fund. The launch will allow any investor with a brokerage account to get low-cost, liquid access to PIMCO’s vaunted bond manager, Bill Gross. [PIMCO Says Total Return ETF to Launch in March]

An ETF version of Total Return Fund will have big ripple effects for the investment-management business, which is dominated by mutual funds, observers say. The ETF is expected to start trading in March. [A Look at PIMCO’s Planned ETF]

More mainline asset managers that oversee active funds could follow PIMCO into the ETF business. The bottom line is that ETFs offer a more investor-friendly “wrapper” due to their low expense ratios, tax efficiency, transparency and ability to buy and sell during the trading day.

Scott Burns, director of ETF analysis at Morningstar, says the asset-management industry is asking the wrong questions about active ETFs.

In fact, it should just stop thinking about “ETF investors” altogether and simply think about “investors,” he notes.

“Ultimately, investors want and deserve all of the advantages the ETF structure and stock exchanges can provide whether the underlying strategy is active or passive,” Burns wrote in a commentary Wednesday. “For their part, fund companies and the broader asset management community need to open their eyes and start asking the right questions to the right people. In the end, the investor is going to get what he or she wants — one way or another.”