While the two fund types are very similar, the Total Return mutual fund can use derivatives. The BOND ETF gained exemptive relief before the SEC lifted the moratorium on derivatives for actively managed ETFs.
Jacobson explains the mutual would use derivatives if they looked cheaper than the cash bond market or vice versa and helped manage liquidity. The analysts also adds that the company has been using fewer derivatives to scale back its risk exposure.
As an ETF, BOND also discloses its holdings daily, but front running – people trying to get ahead of the fund positions – has not been a big issue.
“I don’t really think it’s been a concern, and manager Bill Gross has said as much in some of his comments that he feels that the bond market in general–when PIMCO goes out to the bond market to purchase securities, the market gets a feel what PIMCO is doing,” Strauts said. “So, I don’t feel that the daily disclosure has any way impacted them.”
For more information on the Total Return Fund, visit our BOND category.
Max Chen contributed to this article.