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Monday, August 06, 2012

Is Pimco Working to Dominate the Active ETF Market?

News summary by MFWire's editors

Pimco plans to offer ETF versions of other funds after the success of the Total Return ETF.

The Wall Street Journal reports that Pimco is looking into launching ETF spins of Pimco Real Return, Pimco Low Duration and Pimco Diversified Income, although no launch dates have been set yet. Those funds have $24.6 billion, $22 billion and $6 billion in assets, respectively.

Though index products now dominate the market, Douglas Hodge says Pimco views this "as another means to provide individual investors access to Pimco's thinking, strategy and active management."

There are certain benefits that an ETF can offer over its mutual fund progenitorTake for instance, the Total Return bond fund and ETF.

“With the mutual fund, you get unlimited liquidity at a single price at the end of the day...[though] you forego some transparency,” Hodge explained. Meanwhile, the ETF version's cost of shares can be pushed above the per-share value because of trading spreads and fees. ETF versions disclose their holdings everyday and can be traded the whole day.

Not all actively managed ETFs by the fund giant were instant hits. This includes the $28.5 million Pimco Global Advantage Inflation-Linked Bond Strategy ETF, which had a tough time attracting new money. The fund competes against SSgA's $1.3 billion SPDR DB International Government Inflation Protected.

Eric Jacobson, a Morningstar analyst, said this bold move to ETFs by Pimco equates to "constructive paranoia." Pimco is making aggressive moves to position itself in actively managed ETFs.  

Edited by: HFD

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