Bill Gross' recent unequivocal call for investors to dump some
of the more popular bond ETFs in favor of his very own Pimco Total
Return ETF (NYSEArca:BOND) was something to behold, as this edited
video makes perfectly clear.
Gross was the keynote speaker at IndexUniverse's Inside Fixed
Income conference, and covered a wide range of topics in his nearly
hour-long appearance, including Pimco's "new normal" thesis on how
the developed world is in for a period of relatively slow growth,
and how the Federal Reserve will extricate itself from the
easy-money policies it has embraced since the economy collapsed in
But his call for investors and advisors to exit holdings of the
Vanguard Total Bond Market ETF (NYSEArca:BND) and the iShares
Barclays Aggregate Bond Fund (NYSEArca:AGG) in favor of BOND was
undoubtedly one of the highlights of the one-day conference.
"If you have clients in BND or AGG, get them over [to BOND],"
Gross told the audience of financial advisors. "I don't care about
the fees. Just bring them over because you'll be helping them out.
I can't guarantee it … but I think it's a pretty good bet."
Gross was referring to BOND's relatively pricey expense ratio
compared with the Vanguard and iShares ETFs he singled out. BOND
costs 0.55 percent a year, while iShares' AGG and Vanguard's BND
cost 0.20 percent and 0.10 percent, respectively.
He said beating indexed bond funds is still achievable, but the
task is growing harder as BOND grows bigger. The fund, which
launched on March 1, 2012, is the second-fastest-growing ETF in
history, after the SPDR Gold Shares (NYSEArca:GLD), the $75 billion
physical gold ETF.
"Their universe is basically a 40 percent Treasurys
universe yielding 90 basis points. You can't produce
return out of that type of yield," Gross said, referring to
BOND's two competitors.
BOND has assets of $2.95 billion, while BND and AGG have $17.5
billion $15.6 billion, respectively, according to data compiled by
The Inside Fixed Income conference was held on Sept. 20 in
Newport Beach, Calif., the same city where Pimco is based.
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