Actively managed ETFs have been around for awhile, but have failed to catch fire among investors. Now rock star investment manager Bill Gross plans to change all that with the PIMCO Total Return ETF (TRXT).
While ETFs have become wildly popular, actively managed ETFs have done less well against their older and more well established brethren, mutual funds. More than $1 Trillion has gone into exchange traded funds, but less than $5 Billion is in actively managed funds.
But clearly Gross and others see potential to go after the much larger mutual fund business with ETFs that offer lower expenses, more trading opportunities, more transparency and significant tax advantages over mutual funds.
Bear Stearns started the actively managed ETF business in 2008 and has been joined by other big names like BlackRock (NYSE:BLK), WisdomTree and Advisor Shares. PIMCO itself is a big player already in actively managed ETFs with its $1.4 Billion Enhanced Short Maturity Strategy (NYSEARCA:MINT), among others, and this new ETF is designed to closely replicate PIMCO’s famous $250 Billion Total Return Fund.
So will Gross’s new ETF fly? It got off to a good start with more than $100 million in assets on its first day of trading.
The ETF will charge 0.55% and will be run by Bill Gross, himself. Gross is a leading player in the bond world and has been a multiple winner of Morningstar’s Fixed Income Manager of the Year award. One limitation that advisers have already mentioned is that the ETF cannot trade derivatives as Gross’s other bond funds do because of limitations imposed by the SEC. And the other thing that has the ETF world buzzing is that ETFs require daily disclosure of portfolio holdings and so investors will be able to see Gross’s portfolio moves on a real time basis which has never been done before.
Bottom line: Gross and PIMCO always aim high and usually succeed. There’s no reason to believe that this latest outing won’t be equally successful, and it’s quite likely that the PIMCO Total Return ETF will be a commanding player in the ETF world in years to come.