Pimco Total Return ETF outperforms the mutual fund it tracks

The Pimco Total Return ETF has doubled its assets in under two months, after launch on March 1, outperforming the mutual fund it tracks.

The Total Return ETF fund has shown growth of 7.7%, compared to the 4.2% of the Pimco Total Return mutual fund. Both funds are managed by Bill Gross, founder and co-CIO at Pimco (pictured). As at July 6, the ETF had assets of $2bn, while the mutual fund had $263bn, according to Bloomberg.

The asset management industry is following the progress of the fund, as the fee structure of actively managed funds has come under pressure. Gross’s ETF charges an annual fee of 0.55%, which is 20 basis points less than the retail version of the mutual fund.

The mutual fund already outperforms almost all other similar funds this year and over five years. The fund has also benefited from an investor shift towards bond funds, in reaction to the difficult market conditions. Morningstar’s US data shows $196bn has been invested in bond funds, while investors have withdrawn $129bn from stocks.

The mutual fund invests in options, futures and swap agreements but the US Securities and Exchange Commission has frozen approval of new ETFs making significant use of such instruments. Pimco said the Total Return ETF would invest in these instruments, if allowed.

Pimco launched the fund as an experiment to marry the advantages of the ETF with the active bond selection skills of Gross, a veteran of the bond markets. The fund is Pimco’s sixth actively managed ETF. In April, Pimco launched an actively managed ETF that invests in global inflation-linked government bonds denominated in local currencies. 

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