Earlier this month, PIMCO’s co-chief investment officer launched the Total Return Exchange-Traded Fund (NYSE:TRXT). This is essentially the ETF version of the Total Return (MUTF:PTTRX) mutual fund, which is the world’s largest bond fund at $252 billion in assets under management.
While most ETFs are based on indices and computer algorithms, the Total Return offering is one of the few that is actively managed.
So far, Gross is pleased with the performance of the TRXT, as per an interview on Yahoo Finance. He said the ETF has generated 100,000 to 200,000 shares in daily volume, which is fairly substantial for a new fund. He also pointed out that the fund has beat out many of its indexed rivals.
Great, huh? Well, for investors, this is really meaningless. It’s definitely not advisable to invest in a fund based on less than a month’s worth of data. Instead, investors should at a number of other factors.
For one, look at Gross’ overall track record. That’s impressive. During the past 15 years, the Total Return Fund has posted an average annual return of 7.4%. Now, it’s true 2011 was tough, with the fund generating a gain of only 4.16%. But again, the long-term performance is really a key when looking at bond funds.
And while the Total Return ETF itself is not an exact replica of the mutual fund — because of regulatory requirements, there are no derivatives allowed, such as options, futures and swaps — this isn’t enough reason to avoid TRXT.
With the bond market seeing a rough patch because of renewed economic growth — which has driven up interest rates — having active management likely will be important. So for investors looking for an easy way to get exposure to this asset class, the Total Return ETF should be a good choice.
Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. He also is the author of “The Complete M&A Handbook”, “All About Short Selling” and “All About Commodities.” Follow him on Twitter at @ttaulli or reach him via email. As of this writing, he did not own a position in any of the aforementioned securities.