Pimco’s BOND Becomes A $1 Billion Fund

May 22, 2012

Bill Gross adds another  $1 billion to his smile, as BOND crosses the $1 billion threshold.

The Pimco Total Return ETF (NYSEArca: BOND), the exchange-traded-fund version of Bill Gross’ flagship $250 billion mutual fund, crossed the $1 billion barrier Monday, less than three months after it came to market amid a great deal of buzz and expectation.

Many in the ETF industry had predicted BOND, launched March 1, would swiftly surpass the Pimco Enhanced Short Maturity Strategy Fund (NYSEArca: MINT) to become the biggest actively managed U.S.-listed ETF. BOND had just over $1 billion as of May 21, compared to $1.65 billion for MINT, according to data compiled by IndexUniverse.

The rapid pace of asset gathering makes BOND one of the quickest-growing ETFs ever. But to keep it all in perspective, the SPDR Gold Shares (NYSEArca: GLD), State Street Global Advisors’ physical bullion ETF, achieved that milestone in just three short days after its launch in November 2004, according to an official at SSgA. GLD is now the world’s second-biggest ETF, with more than $65 billion in assets.

Still, BOND is clearly this year’s fastest-growing ETF, putting it in the company of last year’s most successful launches—the PowerShares S&P 500 Low Volatility Portfolio (NYSEArca: SPLV) and the iShares High Dividend Equity Fund (NYSEArca: HDV).

SPLV, which took about nine months to become a $1 billion ETF, now has $1.65 billion, and HDV, which took a bit more than 10 months to reach $1 billion in assets, now has $1.47 billion. The Vanguard S&P 500 ETF (NYSEArca: VOO) also looms largely as one of the more successful launches in recent years. VOO came to market in September 2010, and within six months had $1 billion. It now has $4.18 billion.

A bigger consideration all along for BOND was whether its success might jump-start the world of actively managed ETFs. As things stand, active ETFs account for less than 1 percent of the more than $1.137 billion invested in U.S.-listed exchange-traded funds.

A More Active Future?

The percentage of active ETFs jumps to about 2 percent when confined to just fixed-income funds and moves sharply up to around 15 percent when considering just currency-related active ETF strategies, according to data compiled by IndexUniverse.

The catalyst for BOND’s success is undoubtedly Bill Gross himself—a money manager whose stature is just this side of Warren Buffett’s in terms of name recognition.

More broadly, many in the ETF industry say marquee names such as Gross’ or that of his firm, Pimco, will make all the difference in the world for the success of active ETF strategies.

After all, a firm such as Bethesda, Md.-based AdvisorShares has been prospecting for business in the active ETF space for a number of years, and doesn’t have as many assets as Pimco—or BOND or MINT, for that matter—according to IndexUniverse’s “ETF League Table” and other data we compile.

Axel Merk, a Palo Alto, Calif.-based money manager known for its currency-related investment strategies, said as much in a recent interview with IndexUniverse about the importance of big names to the future of active ETFs.

Merk, whose firm filed in March to market his flagship $600 million Merk Hard Currency Fund in an ETF wrapper, argued that the ETF was the logical investment vehicle of the future, and the arrival of reputed mutual fund firms with well-known strategies would open the floodgates for actively managed ETFs.


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