Beating BOND: Some Bond Funds Trumping PIMCO Juggernaut
When it comes to ETFs and superlatives, few can surpass the PIMCO Total Return ETF (NYSE: BOND). Not only is the fund frequently referred to as the Bill Gross ETF, perhaps the best marketing advantage in the history of ETFs, BOND is now the largest actively managed ETF.
It is impressive that BOND is the largest actively managed ETF, but what is more impressive is how quickly the fund the fund has amassed almost $2.1 billion in assets under management. BOND reached that lofty total in less than five full months of trading.
That means BOND is by far the most successful new ETF of 2012 in terms of assets. To its credit, BOND deserves the ample praise it has received because the fund has returned 5.3 percent since inception.
Yet for the warranted superlatives, BOND has not been the best-performing bond fund investors could have been involved with over the past 90 days. Believe it or not, there are multiple bond ETFs that have outpaced BOND in the past three months and some are worth more than just a passing glance.
PowerShares Emerging Markets Sovereign Debt ETF (NYSE: PCY) In terms of AUM, BOND recently passed the PowerShares Emerging Markets Sovereign Debt Portfolio, but with $2.06 billion in AUM, PCY is still a big ETF. This monthly dividend payer has also been at the right place at the right time this year as investors have embraced dollar-denominated emerging markets debt.
PCY's particulars stack up favorably against BOND's. The former charges 0.5 percent per year compared to 0.55 percent for the latter. The 30-day SEC yield on PCY is roughly 260 points higher than BOND's. More importantly, PCY has outperformed BOND by 110 basis points in the past 90 days.
PCY's primary rival, the iShares J.P. Morgan USD Emerging Markets Bond Fund (NYSE: EMB), has lagged BOND over that time.
Market Vectors CEF Municipal Income ETF (NYSE: XMPT) A recent jump in municipal bankruptcies might have some investors thinking twice about muni bond ETFs, but the numbers do not lie. The Market Vectors CEF Municipal Income ETF acts as a fund of funds because its index is composed of shares of municipal closed-end funds "that are principally engaged in asset management processes designed to produce federally tax exempt annual yield," according to Market Vectors.
XMPT is tiny with just $10.1 million in AUM, but the ETF features an expense ratio of 0.4 percent and a 30-day SEC yield of 5.43 percent, besting BOND on both accounts. In the past three months, XMPT has outpaced BOND by 45 basis points.
iShares iBoxx $ Investment Grade Corporate Bond Fund (NYSE: LQD) BOND still has a long way to go to rival the iShares iBoxx $ Investment Grade Corporate Bond Fund, the largest ETF tracking corporate bonds, in terms of AUM. LQD's haul is almost $23.5 billion. The PIMCO offering is not heavy on corporates, so some might say this is not an apples-to-apples comparison.
Fair enough, but LQD is the type of ETF conservative income investors look to, as is BOND. However, LQD is far cheaper with fees of just 0.15 percent per year. In the past 90 days, BOND has narrowly outperformed LQD, but the tide has turned strongly in favor of LQD in the past month. In that time, iShares fund has generated almost double the returns offered by BOND.
WisdomTree Emerging Markets Local Debt Fund (NYSE: ELD) A lot of folks have said BOND is a "game-changer" among actively managed ETFs. Perhaps they did not get the memo about the WisdomTree Emerging Markets Local Debt Fund. Long before BOND came around, ELD became the first actively managed ETF to surpass $1 billion in AUM. Meaning that it was ELD that BOND wrested the title of "largest actively managed ETF" from.
ELD still has a few feathers in its cap. It has the same fees as BOND and the former's 30-day SEC yield is far higher than the latter's. A solid alternative for investors looking for non-dollar denominated assets, ELD is up 2.4 percent in the past month compared to 1.8 percent for BOND.
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