The Day the Mutual Fund Died

Today marks what I believe will be the shot heard ’round Boston as Pimco takes the world’s largest mutual fund (Pimco Total Return) and repackages it into an ETF.  I will not be investing it nor would I recommend anyone else do so – this is a new vehicle and there is plenty of uncertainty about how closely it will track the mothership in this new format.  But if it is successful and can garner AUM – you’ll be able to trace back the end of the mutual fund wrapper over the next ten years to this Promethean moment for active ETFs.

My original prediction from Fortune Magazine is here.

Pimco’s press release:

PIMCO Introduces the Total Return ETF: TRXT
Provides investors a new way to access PIMCO’s Total Return Strategy
NEWPORT BEACH, CALIFORNIA (March 1, 2012) – PIMCO, a leading global investment management firm, has introduced the PIMCO Total Return Exchange-Traded Fund (ticker: TRXT), providing investors and financial advisors with a new way to access the firm’s Total Return strategy. TRXT is managed by PIMCO’s founder and Co-Chief Investment Officer William H. Gross.
“For 40 years, PIMCO has created investment strategies designed to help our clients reach their goals, delivered in the vehicle that they determine is best for them,” said Mr. Gross. “The Total Return ETF harnesses PIMCO’s time-tested investment process and our skills as an active manager, and we believe it signals an important new phase in the development of the ETF marketplace.”
TRXT is designed to be a diversified portfolio of high quality bonds that is actively managed with the aim of maximizing return and managing risk. Some of its potential benefits include:
• Direct access to PIMCO’s portfolio management expertise, including global credit analysis and interest rate forecasting
• Portfolio diversification, income, the opportunity for capital appreciation and excess return in an actively managed, risk-controlled framework
• An investment strategy managed for all market environments, emphasizing both top-down macroeconomic analysis and bottom-up issue selection
• Full benefits and flexibility of the ETF vehicle, including intraday pricing, the ability to be traded using limit and stop loss orders as well as daily portfolio disclosure and low investment minimum (1 share)
TRXT adds to PIMCO’s expanding platform of active and index ETFs that are designed to meet a broad range of investor needs. These solutions include the PIMCO Enhanced Short Maturity Strategy Fund (MINT), which is currently the world’s largest actively managed ETF by assets under management; several actively managed municipal bond strategies and more than a dozen “smart-passive” index ETFs, including the recently-launched Australia, Germany and Canada Bond Index Funds. Smart-passive ETFs incorporate credit analysis to screen out securities that are illiquid or don’t pass other key risk metrics.





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