BOND has outperformed its mutual fund counterpart over the past year, rising 5.4%, compared to the 4.2% gain in PTTRX.

Since launching in 2012, BOND has only been able to utilize forward contracts. According to PIMCO, futures, options and swaps are prohibited. Rosenbluth argues that the Total Return Fund requires derivatives to limit its effect on the market because of the sheer size of the fund, whereas moving the market is less of a concern for the smaller ETF. BOND has $3.5 billion in assets, whereas the Total Return Fund has $223.1 billion in assets. [Bill Gross ETF Not Affected by PIMCO’s Increased Use Of Swaps]

The firm will have to update its prospectus disclosure to reflect the use of derivatives before the ETF can hold them.

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