(Bloomberg News) Bill Gross said it still bothers him that high brokerage-firm minimums stopped his mother from buying shares of Pimco Total Return Fund, the mutual fund he runs that became the world's largest in 2009.
Size limitations for small clients have prevented many investors from owning Pacific Investment Management Co.'s flagship fund, Gross said in a telephone interview yesterday from his office in Newport Beach, California. That will change as Gross's Pimco Total Return Exchange-Traded Fund opens today under the ticker symbol TRXT, allowing investors to buy shares for as little as a few hundred dollars.
"Small investors don't always have access to active management with a higher yield and a higher total return," said Gross, who is co-chief investment officer at Pimco. "We are hoping 'mom and pop' can do a little bit better than the bond market at a time of historically low yields."
Gross's new vehicle, designed to blend the trading flexibility and accessibility of ETFs with the stock- or bond-picking ability of active management, tests investor appetite for a niche that has attracted less than 0.5 percent of the $1.13 trillion in U.S.-registered ETF assets. The potential for growth has spurred Pimco, along with at least two dozen other money managers including BlackRock Inc. and Legg Mason Inc., to vie for a slice of the active ETF business, which would compete with the $9.41 trillion mutual fund industry.
"Pimco's entry was the most important development in the industry over the past couple of years," Loren Fox, senior research analyst at New York-based research firm Strategic Insight, said in a telephone interview. The ETF will attract "price-conscious small investors," according to Fox.
Combining Attributes
ETFs typically hold baskets of securities while trading throughout the day like stocks, instead of being priced once a day like most mutual funds.
Active versions seek to combine the skill of fund managers in selecting securities with the lower fees, market trading and tax advantages of ETFs. Passive products, which track broad market benchmarks such as the Standard & Poor's 500 Index, dominate the business.
Total ETF assets have surged more than 10-fold since 2001, according to the Washington-based Investment Company Institute, making them the fastest-growing product in the money-management industry.
Bear Stearns Cos., the now defunct investment bank that was acquired by JPMorgan Chase & Co., was the first firm to open an actively managed ETF in March 2008. The fund was liquidated that year after the firm was sold.