There is no doubt that the PIMCO Total Return ETF (NYSE:
), also known as the Bill Gross ETF, has been the most successful
new ETF to come to market in 2012. Following it's April debut,
BOND, the ETF equivalent of the wildly popular PIMCO Total Return
mutual fund, has risen more than four percent and has accumulated
more than $1.72 billion in assets under management
according to PIMCO data
Barring a miracle, it is unlikely any other ETF that has
debuted this year will come within spitting distance of BOND's
Along the way, BOND has been on the receiving end of an almost
alarming amount of praise. Some have deemed the ETF to be a
for actively managed funds
. The term "game-changer" as it pertains to BOND has been beaten
like a dead horse. (Put the phrase "BOND ETF game-changer" into
Google for supporting evidence.)
It can be argued that the real news is not that BOND has been
so successful. No other ETF has the benefit of being known as the
Bill Gross ETF and few ETF sponsors have the marketing resources
that PIMCO has
It is only slight hyperbole to say those that have fallen in
love with BOND are acting as if this ETF has solved the mystery
of cold fusion, can change water into wine and commit other
heroic acts that deem the fund worthy of an unending spate of
Arguably, BOND's success acts a distraction for investors. For
example, it seems to be forgotten that the WisdomTree Emerging
Markets Local Debt Fund (NYSE:
) is an actively managed ETF. ELD, which charges 0.55 percent per
year just as BOND does, is no shrinking violet among actively
managed ETFs with almost $1.2 billion in AUM.
ELD has a cousin, the WisdomTree Asia Local Debt Fund (NYSE:
). ALD, which debuted in March 2011, is also actively managed and
charges the same fees as BOND and ELD. In terms of size, ALD is
by no means small with $413 million in AUM, yet these successful
products go almost unnoticed because praising BOND has become a
full-time job for many.
There are even some bond funds that are outpacing BOND. As was
noted earlier, since the PIMCO offering came to market in April,
it has returned 4.1 percent. As of June 28, BOND had a 30-day SEC
yield of 2.96 percent.
Those numbers pale in comparison to what the unheralded Market
Vectors CEF Municipal Income ETF (NYSE:
) has offered. Since BOND's debut, the Market Vectors CEF
Municipal Income ETF has jumped five percent. As of June 29, XMPT
had a 30-day SEC yield of 5.52 percent. To be fair, XMPT's
expense ratio is 98 basis points higher than BOND's, but that is
buffered by better performance and a higher yield.
Staying with the theme of municipal bonds, an
asset class that investors have embraced in a big
way this year
, there are other funds that stack up favorably against BOND.
Consider the case of the Market Vectors High-Yield Municipal
Index ETF (NYSE:
). To be fair, it should be noted that BOND has outpaced HYD by
about 120 basis points since the former debuted. However, HYD is
20 basis points cheaper and its 30-day SEC yield is 210 basis
points higher. Those are points in HYD's favor that cannot be
glossed over just because Bill Gross has a new ETF on the
Then there is the case of the newly minted iShares Utilities
Sector Bond Fund (NYSE:
). AMPS debuted in February and has been outperformed by BOND
since the latter came to market. The iShares offering tracks
primarily investment-grade corporate bonds issued by utilities.
AMPS' 30-day SEC yield is slightly higher than BOND's and the
sector fund has an expense ratio of 0.3 percent, 25 basis points
lower than BOND's.
In the essence of clarity, this piece should not be construed
as negative or an affront to anyone in particular. BOND has been
a success. That is good for PIMCO and good for the fund's
shareholders. That said, investors should not let all hullabaloo
surrounding BOND distract them for the myriad of other worthwhile
bond funds on the market.
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