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Pimco Total Return ETF To Launch March 1

Pimco, the world’s biggest bond fund manager, revealed today that it plans to launch the exchange-traded fund version of its flagship Total Return Fund on March 1, which will bring to fruition a process that began last April when it first filed for regulatory permission to bring the ETF to market.

“The PIMCO Total Return Exchange-Traded Fund (ticker TRXT) is scheduled to list on March 1, 2012,” the Newport Beach, Calif.-based company said in a terse statement posted on its website. “More information about the fund will be provided as the listing date approaches.”

What is known about TRXT from previous regulatory filings is that the fund will have an annual expense ratio of 0.55 percent. That’s 40 basis points cheaper than the “A” class mutual fund version that’s most appropriate for retail investors. That said, it’s also possible for institutional investors, in size, to get that price down to a no-load 46 basis points.

The mutual fund version of the Total Return Fund has $241 billion in assets, making it one of the biggest portfolios in the world. It launched in 1986 during the heyday of the active mutual fund boom. It’s been one of the most successful fixed-income funds in the world, and has just about made its manager, Bill Gross, a household name in America.

Gross’ moves are followed by fixed-income watchers the way Warren Buffett’s stock picks are. When Gross moved the Total Return out of U.S. government debt in March of last year, it made international headlines.

That decision hurt him in 2011, when the Total Return Fund returned 4.17 percent. The year before, it had gains of 8.36 percent, and in 2009 it returned 13.33 percent. Amazingly, it even had total returns of 4.33 percent in 2008, the year financial markets became unhinged after the collapse of Lehman Brothers.

Pimco already has one of the most successful active ETFs on the market. Its Pimco Enhanced Short Maturity Strategy Fund (NYSEArca:MINT - News), a money market fund equivalent, had assets of $1.81 billion as of Jan. 9, according to data compiled by IndexUniverse.

Not Exactly The Same

It’s worth noting that the Pimco Total Return ETF won’t technically be the same portfolio as the Total Return mutual fund. One big difference is that it won’t make use of derivatives the way the mutual fund does.

Also, while its TRXT will be an actively managed fund, its holdings will be transparent, meaning it must make them public every day, as it does for MINT.

The Securities and Exchange Commission has yet to allow any ETF to hew to the portfolio disclosure requirements of actively managed mutual funds, which call for reporting of holdings on a quarterly basis and often with a lag time of up to 60 days.

Additionally, part of the Total Return mutual fund strategy is to step away from fixed income when it makes sense. The fund will only target 65 percent of fixed-income exposure, and can put up to 15 percent of its assets in securities deemed illiquid.

This go-anywhere strategy has served the fund well performancewise, and has led some to call Total Return a hedge fund in mutual fund clothing.

It has experienced periods of very high turnover, and it’s not uncommon for an entire sector of debt to go from 25 percent of the portfolio to nothing in a quarter should Gross make a tactical call.

The ETF will be have a primary listing on Arca, the New York Stock Exchange’s electronic trading platform, according to regulatory paperwork Pimco has submitted to the SEC.

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