There are two reasons why the Pimco [profile] Bond ETF has outperformed its mutual fund counterpart, writes Marc Prosser for Forbes.

BOND set sail on March 1, which is the key to its first edge: the BOND Fund is new. Prosser writes:

"Fund’s Manager and PIMCO founder Bill Gross did not have to deal with any legacy positions that may have hindered performance in the 25 year old Total Return Bond Mutual Fund."

The second reason for the BOND fund's better performance by 2 percent is its far lower levels of AUM. In short, nimbleness matters, writes Prosser:

"The PIMCO Total Return Fund has over $250 Billion under management. This makes it very difficult to move in and out of positions, and significantly limits the universe of investable opportunities. With less than ½ a percent of the assets in the Mutual Fund, the relatively small size of the BOND ETF opens up a lot more opportunities to the ETF, that are too small for the larger mutual fund."

If a reporter at Forbes has caught on to these edges, it is a good bet that advisors have also and that the second edge (smallness) is going to start to disappear. 

Edited by: HFD


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