Pimco to launch ‘Total Return’ bond ETF

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Investors who want to trade with bond guru Bill Gross on a minute-by-minute basis now will get their chance: The Newport Beach-based Pimco mutual funds plan to launch an exchange-traded ‘Total Return’ bond fund managed by Gross.

As required with an ETF, the holdings of the new fund would be disclosed on a daily basis, rather than once a month as Pimco currently does with the conventional mutual fund version of Total Return. But Gross has hardly been shy about telling the world about his portfolio shifts.

Investment research firm and mutual-fund rater Morningstar Inc. lauded Pimco’s decision. “We have advocated for an [ETF of Total Return] under the argument that the fees for retail investors could be lower, the tax efficiency could be higher, and the fund distribution channel is open to all,” analyst Robert Goldsborough wrote on Morningstar’s website on Wednesday.

But he also noted that it wasn’t clear how closely the ETF version of Total Return, which would trade on the New York Stock Exchange’s Arca market, would track the conventional fund’s portfolio.

Pimco’s registration statement for the ETF warns investors that the ETF’s investments and results ‘are not expected to be the same as those made by other funds for which Pimco acts as an investment adviser, including funds with names, investment objectives and policies similar to’ the proposed ETF, Goldsborough said.

“Put another way, Pimco is telling investors that the proposed ETF may be managed differently or trade after the mutual fund makes its trades,” he said. “As a result, those investors who want to jump ship from [Pimco Total Return] in search of a possibly lower fee from the ETF version may see different results.”

-- Tom Petruno