Pimco Total Return ETF To Cost 0.55%

By
ETF.com Staff
July 07, 2011
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Pimco announces the price of its Total Return ETF, suggesting launch is nearing.

Pimco, the world’s-biggest bond fund manager, revealed in a regulatory filing today that the ETF version of its flagship Total Return Fund will have an annual expense ratio of 0.55 percent, or 40 basis points lower than the “A” class mutual fund version that’s most appropriate for retail investors.

Pimco also said the new ETF will trade on the New York Stock Exchange’s electronic trading platform, Arca, under the symbol “TRXT.” The regulatory paperwork the company submitted to the Securities and Exchange Commission over the past week suggests the Pimco Total Return Exchange-Traded Fund (NYSEArca: TRXT) is nearing launch. However, company officials weren’t immediately available to comment on when Pimco might bring the ETF to market.

Depending on the share class, investors can pay a front-end load and up to 85 basis points for the privilege of owning the Pimco Total Return mutual fund, although it’s possible for institutional investors to get that down to a no-load 46 basis points, in size.

As we wrote in April when TRXT went into registration, Pimco Total Return’s mutual fund version is the largest fund in the world, at about $236 billion. It launched in 1986, the heyday of the active mutual fund boom. It’s one of the most successful fixed-income funds in the world. It’s returned 3.32 percent year-to-date, and had gains of 8.36 percent in 2010, 13.33 percent in 2009 and, surprisingly, 4.33 percent in 2008.

Total Return is the poster child for Bill Gross, Pimco’s bond-picking maven. Gross’ moves are followed by fixed-income watchers the way Warren Buffett’s stock picks are. When Gross moved Total Return out of U.S. government debt in March of this year, it made international headlines.

It’s worth noting that the Pimco Total Return ETF won’t technically be the same portfolio as the Total Return mutual fund. That kind of hub-and-spoke arrangement is still unique to Vanguard, until Vanguard’s patent on the process expires in a few years.

Part of the Total Return strategy is to step away from fixed income when it makes sense. The fund will only target 65 percent of fixed-income exposure, and can put up to 15 percent of its assets in securities deemed illiquid.

This go-anywhere strategy has served the fund well performancewise, and has led some to call Total Return a hedge fund in mutual fund clothing. The fund has experienced periods of very high turnover, and it’s not uncommon for an entire sector of debt to go from 25 percent of the portfolio to nothing in a quarter, should Gross make a tactical call.

 

ETF DAILY DATA

The oil funds 'XOP' and 'OIH' gathered money on Thursday, April 16, helping lift total U.S.-listed ETF assets to a record $2.158 trillion.

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