Bill Gross Talks QE3, PIMCO’s New ETF

"We've noted that for a long time. This is simply a cautionary element that suggests that when interest rates come down close to zero and when the discounting of those interest rates and equity prices and other financial assets produce a perspective of 4%-5% total return for the combined asset class is in our view, then it's incumbent upon a manager to keep expenses low and to alert investors as to the importance of expenses relative to lower returns in this new financial world that we speak to."

On investor appetite for PIMCO's new ETF:

"We wanted to be able to give investors a choice. We recognized the tremendous importance of the retail distribution network for PIMCO and for the Total Return Fund, which is now $253 billion. Thank you very much, we don't want to discourage that. But there are investors in the $10,000-$20,000 category, who find it difficult to buy PIMCO Total Return. We thought this would be a good way to do this in the actively managed ETF space. By the way, we're outperforming the market in the first month or so by a good 200 basis points."

On PIMCO's appetite for Treasuries:

"We have an average appetite in terms of duration space. And to the extent that five-year Treasuries, which are being issued today, and seven-year Treasuries tomorrow—they reflect a relatively firm commitment on the part of PIMCO, which reflects a relatively firm commitment on the part of the Fed that they'll keep interest rates firm until late 2014. Bernanke mentioned yesterday that that wasn't a commitment in total but it's subject to a relatively slow economy and contained inflation, which is what we see now. A five-year security at slightly above 1%, to our way of thinking, as it rolls down the yield curve and becomes a four-year, produces close to a 2% return and is that a super, deeper attractive type of return? Well it's up to history. No, it's not … but it's certainly better than nothing.

"We have reduced our Treasury commitment slightly. From the standpoint of duration, we have average duration of an average maturity across the board but we have been reducing Treasuries and investing in shorter duration corporates and rather heavily in the agency mortgage market. You can get, with a Fannie or a Freddie coupon that is a 4% coupon, you can realize 3% as opposed to the 2% or 1% I mentioned in terms of five-year space. We're really focusing on spread and the lack of volatility going forward for the next two to three years, which is really the domain of 30-year and 15-year mortgages."

On finding investing opportunities in developing countries: 

"Where is that attractive growth? Countries like Brazil, countries in Asia, China-related of course. These countries don't come without risk. They don't come without a rather volatile situation in terms of inflation or potential currency disorder. If an equity investor is looking for growth, you want to go developing as opposed to developed. Even a bond investor, if you are looking for higher real rates such as in Brazil, you want to go to developing as opposed to developed."