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July 14, 2011 at 11:34 AM
“When you are the biggest mutual fund in your category and continue to generate above-average long-term returns, what’s left for you do?” That’s an important question proffered by S&P mutual fund analyst Todd Rosenbluth.
“If you are PIMCO, then the answer is to take your taxable bond Total Return offering and launch an ETF version of it later in 2011,” he writes in an S&P Equity Research piece released Tuesday. Rosenbluth then takes a close look at what the ETF’s launch, already slated by PIMCO for later this year, means for mutual fund and ETF investors.
He begins by noting fund manager Bill Gross’ performance and tenure.
“The institutional share class of PIMCO Total Return is among the top-ranked taxable bond mutual funds, thanks to its strong track record, outperformance of intermediate investment-grade bond peers in nine of the last 10 calendar years, manager Bill Gross’s long tenure with the fund, a below-average duration (interest rate sensitivity), along with an average 30-day SEC yield of 2.6%,” according to Rosenbluth. “Equally important, in our view, is that the fund’s 0.47% expense ratio is below average for a mutual fund in its peer group.”
However, he writes that as investors have become more cost-conscious, they’ve looked to ETFs, which Rosenbluth notes offer diversification benefits like a mutual fund, but with more transparency, typically low costs and no minimum initial investment.
