Annual levy for exchange-traded fund will be 0.55%, while fee for namesake mutual fund is 0.46%
Pacific Investment Management Co.'s first active exchange-traded fund to be run by Bill Gross will charge annual fees of 0.55 percent, as the firm seeks to expand in the fastest-growing industry segment.
Pimco disclosed the cost for the Pimco Total Return Exchange-Traded Fund in a filing today with the U.S. Securities and Exchange Commission. Newport Beach, California-based Pimco said in April it planned an ETF that will follow a strategy similar to Gross's top-ranked $242.8 billion Total Return bond mutual fund. The institutional share class of the mutual fund carries an expense ratio of 0.46 percent.
Gross, 67, is the most prominent fund manager to offer his investment strategy in an ETF format. Total Return, the world's largest mutual fund, has climbed an average of 9 percent annually in the past five years to beat 99 percent of peers, according to data compiled by Bloomberg. Pimco, which is diversifying beyond bond mutual funds under Chief Executive Officer Mohamed El-Erian, pushed into ETFs two years ago.
ETF assets have surged more than 10-fold since 2001 to more than $1 trillion as of May, according to Washington-based Investment Company Institute.
The funds hold baskets of securities while trading throughout the day like stocks. Actively run versions seek to combine the skill of a manager selecting investments with the trading flexibility, lower fees and tax advantages of ETFs, which typically track an index.
No Derivatives
Unlike the Total Return mutual fund, which uses a combination of options, futures and swap agreements, Gross's ETF cannot invest in such derivatives. The SEC said in March 2010 it wouldn't approve new ETFs that make significant use of derivatives, pending a review of the practice that is still ongoing. Should the SEC lift the freeze, the Total Return ETF would invest in derivatives, Pimco said in its April filing.
Pimco manages about $3.2 billion in 17 ETFs, including four that are actively managed. Expense ratios for Pimco's four actively managed ETFs range from 0.35 percent to 0.45 percent, according to the firm's website.
Pimco Total Return Exchange-Traded Fund will trade under the ticker symbol TRXT, the firm said in April.
--Bloomberg News--