Is a PIMCO Bond Hedge Fund ETF For You? (TRXT)

Bill Gross and PIMCO may have missed the mark on the bond trends in 2011, but PIMCO is still perhaps the biggest global axe in the world when it comes to bonds.  Now the firm has launched a new total return ETF for bonds.  It sounds a bit like a hedge fund, but this more or less a mutual fund that will trade like an ETF throughout the day. PIMCO Total Return Exchange-Traded Fund (NYSE: TRXT) launched this week and we wanted to take a look closer at this one.

The ETF landing page notes, “TRXT seeks to provide attractive risk-adjusted returns in all market environments by maintaining a conservative, quality orientation from a portfolio of intermediate-term bonds. At the same time, it draws on multiple sources of value and opportunity to help manage overall risk and increase total return potential.”

Risk-adjusted returns in all market environments… AND…. draws on multiple sources of value and opportunity to help manage overall risk and increase total return potential.  That sure sounds like a hedge fund.  Furthermore, it uses both top-down macroeconomic analysis and bottom-up issue selection.

Bill Gross noted that there are many similarities and some differences between the ETF and PIMCO’s Total Return Strategy.  Same objective and same investing strategy, but the ETF will not use options, futures, or swaps and then there is the issue of timing of cash flows.

As a reminder, a total return fund is not quite the same as an absolute return fund more often associated with hedge funds (although not all hedge funds are absolute return funds). The full TRXT investor kit is here.