BOSTON (AP) — Call it PIMCO Total Return 2.0. The world’s largest mutual fund, run by star bond trader Bill Gross, will soon also be available to investors as an exchange-traded fund.
The March 1 launch could further challenge a mutual fund industry that’s already losing investors to fast-growing ETFs.
For many average investors, it will present a chance to invest in Gross’ historically successful PIMCO Total Return strategy for substantially lower fees.
But the calculation isn’t that simple.
“You might not need the standard three years it takes to assess a new mutual fund,” says Todd Rosenbluth, an ETF analyst with investment researcher S&P Capital IQ. “But it’s worth waiting to understand how the ETF will operate, and its differences compared with the mutual fund.”
Still, the ETF’s potential advantages over the fund make this launch worth watching.
You won’t be alone. New funds and ETFs don’t cause investors to line up like the next generation iPhone, but this is a biggie. It’s a milestone for a fund that has a huge impact on bond markets and the mindset of investment pros. PIMCO Total Return holds about $250 billion, topping the $177 billion of second-biggest fund, Vanguard Total Stock Market Index (VTSMX).
It’s run by a 67-year-old whose bond trades and market commentaries are watched almost as closely as Warren Buffett’s. Gross is a three-time winner of Morningstar’s bond manager of the year title, in addition to honors covering the last decade. Total Return has averaged a 6.3 percent annualized return over the past 10-years, placing among the top 13 percent in its category.
That record took a hit last year when Gross went through a rough patch. The fund’s 3.7 percent return trailed the vast majority of intermediate-term bond funds. Gross was too late to invest in low-yielding U.S. Treasurys, which rallied as investors sought out the least-risky assets. Total Return is rebounding this year, it’s near the top of its category with a return of 2.6 percent through mid-February.
But will the Total Return ETF be a good fit for your portfolio and investing goals? Here’s what investors need to know:
The ETF will trade under the symbol “TRXT.” Because ETFs are priced throughout the trading day, they can be traded like stocks. That makes it possible to lock in a preferred price without waiting for a closing price. That differs from mutual funds, which are priced once a day at the market’s close. But investors buying the ETF through a brokerage may have to comply with restrictions and pay commissions.