In March the launch of the exchange traded fund PIMCO Total Return ETF (NYSEArca: BOND) was a big deal to investors everywhere. Some thought it would put the ETF industry on the map, others saw it as a chance for actively managed ETFs to get off the ground, but either way it is a success.
In a recent interview with The Wall Street Journal, manager Bill Gross said the ETF has “certainly exceeded our expectations.”
After the ETF’s first month on the market, there is about $340 million in assets under management, with about 200,000 shares traded daily. Furthermore, BOND returned 2.52% from its Feb. 29 launch through April 12, according to investment-research firm Morningstar. [PIMCO Total Return ETF: Bill Gross Trims Treasury Holdings]
BOND outperformed its benchmark, the Barclays Capital Aggregate Bond Index by 2.48 percentage points, as well as the mutual fund predecessor, the Pimco Total Return Fund. The ETF is modeled after the world’s largest bond fund with $252 billion in assets and returning 0.74% over the same time period, reports Kirsten Grind for The Wall Street Journal. [Investors Cool on High-Yield Bond ETFs]
Although the ETF version beat the mutual fund over the first month of trading, there are some differences between the products that should be noted. There is a rate sensitivity difference, as BOND has a slightly lower effective duration of 5.28 years compared to a 5.68 year reading for the mutual fund. Also, BOND has about 10% of assets invested in emerging market bonds, and PTTRX has around 2% allocated there. [ETFs VS. Active Managers]