PIMCO's Total Return ETF has seen a healthy percentage gain in assets from inflows since the start of the year, and though it lags the amount flowing into its larger mutual fund sibling, the numbers show the 13-month-old exchange-traded fund is finding its own niche.
In the first quarter, estimated inflows for the Pacific Investment Management Co. Total Return ETF were a combined $700 million, with $174.9 million in January, $273.4 million in February and $251.9 million in March, according to Morningstar Inc., Chicago. For the same period, inflows for the Total Return mutual fund totaled $2.533 billion — $919.2 million in January, $890.6 million in February and $723.4 million in March, according to data provided by Michael Reid, PIMCO spokesman.
However, the ETF's first-quarter inflows accounted for 16.3% of its $4.3 billion in total assets as of March 31, while the Total Return mutual fund's inflows accounted for less than 1% of its $289 billion in assets.
And though no one is suggesting the demise of the world's largest mutual fund, the boom in ETF inflows suggests that some attention among investors could be moved toward them and away from flagship mutual funds.
In PIMCO's case, it's easier to be transparent with a fixed-income fund than with an equity fund, which more often than not eschews transparency because managers don't like to broadcast their strategies. “It's like Coca-Cola,” said Deborah Fuhr, partner and co-founder of research firm ETFGI, London. “They don't want to give away their formula.”
The transparency issue is a major one for large managers with big ETF businesses. Efforts by larger money managers to introduce active equity ETFs are sparse. BlackRock on April 18 introduced two enhanced index ETF strategies — the iShares Enhanced ETFs and the iShares MSCI Factor ETFs — but none that mirror any of BlackRock’s fully active equity strategies. State Street Global Advisors, meanwhile, has filed plans with the SEC for its own active ETFs.
“It's not apples to apples,” Ms. Fuhr said. “What you see is that the majority of ETFs are index-tracking funds. BlackRock doesn't offer both an active mutual fund and a similar active ETF. There aren't a lot of active ETFs out there — less than 1% of all ETF assets are in actively managed ETFs. To be fair, PIMCO is one of the few big firms with success in active ETFs. Others who offer them don't have the global recognition with a long track record in active funds.”