By Timothy Strauts
PIMCO today launches its wildly popular mutual fund PIMCO Total Return in an exchange-traded fund wrapper in one of the most widely anticipated ETF launches in a long time.
The actively managed PIMCO Total Return Exchange-Traded Fund (TRXT) plans to disclose its portfolio holdings daily and charge 0.55%. The price tag makes the ETF substantially cheaper than the 0.85% that the retail version of the mutual fund charges, and it is slightly more expensive than the institutional version of the mutual fund, PIMCO Total Return Institutional Fund (PTTRX), which charges 0.46%.
PIMCO's star fund manager (and co-founder) Bill Gross will run both the ETF and the mutual fund and will make all portfolio calls related to the ETF. Gross--who along with his team received Morningstar's Fixed-Income Manager of the Year honors in 1998, 2000, and 2007--has managed the mutual fund since its inception in 1987.
The ETF version, TRXT, will not use derivatives such as futures, swaps, and options. The lack of derivatives in TRXT will limit some of the tactics employed, but it will make the ETF a more traditional fixed-income vehicle.
As an active ETF, TRXT will be required to disclose its portfolio holdings daily. This will be the first time that investors will be able to see PIMCO's macroeconomic views in real time through the holdings of the ETF. Although the holdings will differ between funds, PIMCO uses a sophisticated trade allocation process to allocate shares of securities to the different funds following the Total Return strategy on a pro-rata basis. This means that the ETF will get new positions at the same time as the mutual fund.
Today's launch is the culmination of a more than nine-month process from the time that PIMCO had submitted a filing with the SEC seeking permission for a version of PIMCO Total Return as an ETF. PIMCO has been broadening its portfolio of actively managed ETFs, and we expect TRXT to draw a significant amount of assets. The firm previously has launched such successful actively managed fixed-income ETFs as PIMCO Enhanced Short Maturity Strategy ETF (NYSEARCA:MINT) and PIMCO Intermediate Municipal Bond Strategy ETF (NYSEARCA:MUNI). In addition, PIMCO plans to roll out an actively managed foreign currency ETF in the near future.
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