Mitchell Reiner comments on PIMCO’s Total Return ETF in his latest guest post as a contributor for Forbes Magazine.
With a quarter of trading under its belt, the PIMCO Total Return ETF (BOND) has gathered over $1.1 billion in assets and returned 5.3%. The $259 billion PIMCO Total Return mutual fund, on the other hand, is up 2.4% over the same time period.
For many investors, advisers and institutions, the traditional fund is a core fixed-income holding. But the introduction of the ETF version, and its performance differences, are compelling many in the market to reconsider how they access bond guru Bill Gross and his strategy. Below are four key points to consider:
Over the past three months the Pimco ETF has significantly outperformed the larger, more mature open-end fund. The reason appears to be BOND’s smaller portfolio, which allows Pimco to move more nimbly and play out strategies in a more timely fashion. If you believe, as many do, that Bill Gross, Mohammad El-Erian and their team are some of the best in the business, this is a good thing.
Of course, there is a flipside to the ETF’s large outperformance. If under/overweight decisions are wrong; you are just as exposed on the downside as on the upside. As advisers—particularly when we outsource parts of a client portfolio to actively-managed mutual funds, we must have confidence that the decisions are more right than wrong. A track record of great decisions and management is key. Pimco carries these characteristics, so therefore, we might be inclined to follow outperformance.
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