Bill Gross Launches Active ETF

Bill Gross Launches Active ETF

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Move over Buffett, Bill Gross is working to take center stage. (STAY AHEAD OF THE CURVE: Follow Kapitall on Twitter)

Pacific Investment Management Co. (otherwise known as Pimco) co-chief investment officer Bill Gross has opened an exchange traded version of its $250 billion Total Return Fund, available to all investors.

Bloomberg reports Pimco's Total Return Fund, ticker symbol TRXT, started trading Thursday morning with a net asset value of $100. Gross wants to kickstart investor interest in Active ETFs (versus the more popular Passive ETFs) with the stock or bond picking ability of an active management.

Perhaps one of the most tempting things about Pimco is that it offers the benefits of Pimco's Total Return Fund without the high brokerage-firm minimums. As Loren Fox of Strategic Insight points out, the ETF is largely focused on "price-conscious small investors."

Gross said, "Small investors don’t always have access to active management with a higher yield and a higher total return. We are hoping ‘mom and pop’ can do a little bit better than the bond market at a time of historically low yields."

Gross predicts investors will get a 3.5% return with TRXT compared to a 2% return currently yielded by passive ETFs that track the investment-grade bond market, reports Bloomberg.  Others are less confident in the fund, which closed slightly below its opening price, joking that investors now have the ability to start "shorting Bill Gross."

Leading the Way?

"We've had two to three years of internal discussions," Gross said to Bloomberg in a telephone interview. "The challenge is obvious. We could fall flat on our face or we could roar like a lion in a year or two or three and become the largest ETF."

Indeed, Gross is treading in rough waters. Bear Stearns Co. was the first to open an actively managed ETF in March in 2008. It was shut down shortly afterwards when the firm was sold.

To date, Bloomberg reports Active ETFs have gathered about $5.1 billion in assets over four years. This is less than 0.5% of the $1.13 trillion in U.S-registered ETF assets. In Pimco's view, these numbers imply ample room for growth.

Gross is easily the most followed mutual fund manager that has taken the leap into active ETFs. If Gross succeeds, it could shift more investor focus towards this small asset class.

Business Section: Investing Ideas

Interested in active equity ETFs? To help you get started on your search, we list all active ETFs below.

Do you think they offer benefits that mutual funds never could?

1. WCM/BNY Mellon Focused Growth ADR ETF (AADR)
2. Dent Tactical ETF (DENT)
3. Mars Hill Global Relative Value ETF (GRV)
4. Cambria Global Tactical ETF (GTAA)
5. Peritus High Yield ETF     (HYLD)
6. IQ Canada Small Cap ETF (CNDA)
7. IQ CPI Inflation Hedged ETF (CPI)
8. IQ ARB Global Resources ETF (GRES)
9. IQ Global Oil Small Cap ETF (IOIL)
10. IQ Australia Small Cap ETF (KROO)
11. IQ Hedge Macro Tracker ETF (MCRO)
12. IQ Hedge Multi-Strategy Tracker ETF (QAI)
13. Active Low Duration Fund (PLK)
14. Active Mega Cap Fund (PMA)
15. Active AlphaQ Fund (PQY)
16. Active Alpha Multi Cap Fund (PQZ)
17. PowerShares Active U.S. Real Estate Fund (PSR)
18. Pimco Total Return ETF (TRXT)

Written by Rebecca Lipman

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One Response to “Bill Gross Launches Active ETF”

  1. Good article. PIMCO is very capable and I would expect its ETF to do quite well.

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