Daily ETF Watch: New Bill Gross ETF Nears

Firms get regulatory approval to launch ETFs all the time, and sometimes they never even launch any funds. But when Janus—which last year hired the world’s most famous bond manager, Bill Gross, away from PIMCO—gets approval, the investment world sits up and takes notice.

In a release dated March 3, the Securities and Exchange Commission said it would approve Janus’ application for exemptive relief to launch transparent actively managed ETFs unless an interested party requested a hearing by March 27.

The likely approval means investors could possibly see a Bill Gross-managed ETF hit the market as early as this year. It looks likely that the first Janus fund will be an unconstrained bond fund—perhaps an ETF version of the one he’s already running for Janus.

Gross joined Janus in September of last year. While chief investment officer of PIMCO, he managed the PIMCO Total Return ETF (BOND | B), an exchange-traded version of a similar—and very popular—mutual fund that was also under his management. BOND is the ETF version of the PIMCO Total Return Fund (PTTRX), a mutual fund.

For a time, BOND was the largest actively managed ETF, but it later lost that title to another PIMCO fund. In the week following Gross’ departure from PIMCO, BOND saw its assets under management fall by more than $540 million; today it has roughly $2.5 billion in assets under management.

Janus first filed for actively managed ETFs in September 2010, with the most recent update to the application in November 2014, so this has been some time coming. In the November filing, the proposed fund seems fairly “go anywhere” in nature, much like the unconstrained bond strategy that Gross spoke about in a presentation to Janus investors in October of last year.

As noted above, Gross already runs an unconstrained bond mutual fund for Janus called the Janus Global Unconstrained Bond Fund (JUCDX). It now has about $1.5 billion, up from less than $100 million when Gross took the helm in September 2014.

Active Muni Fund Launches

BlackRock’s iShares today is launching an actively managed short-term municipal bond fund, the iShares Short Maturity Municipal Bond ETF (MEAR), on the BATS exchange.

The short-term muni bond space is a crowded one, with four different funds already well established in the space. The largest, the index-based SPDR Nuveen Barclays Short Term Municipal Bond ETF (SHM | B-69), launched back in 2007 and has more than $2.5 billion in assets under management.

Meanwhile, iShares already has its own passively managed fund in the space, the iShares Short-Term National AMT-Free Muni Bond ETF (SUB | B-50), which has roughly $890 million in AUM; SUB launched in 2008.

The only actively managed fund is the PIMCO Short Term Municipal Bond ETF (SMMU | C-49). It targets a maximum weighted average maturity of three years. SMMU launched in 2010 and has less than $60 million in AUM.

MEAR targets investment-grade municipal securities with no more than five years to maturity. The fund comes with an expense ratio, after a waiver, of 0.25 percent. Despite the fact that MEAR is actively managed, that’s the same price charged by SUB and only 5 basis points more than SHM. PIMCO's SMMU charges 35 basis points.

With interest rates expected to rise later this year, interest-rate risk is a growing concern for investors, and the short end of the yield curve is drawing investor dollars. For investors looking to take advantage of the tax-free nature of muni bonds while keeping their interest-rate risk under control, a low-priced active ETF with low duration may be just the ticket.