ebook essays pieces of the puzzle
Monday, March 25th, 2013
a successful failure


The PIMCO Total Return ETF (BOND) was launched just over a year ago.  A posting on its first anniversary by Ron Rowland (Invest With an Edge) called BOND a “successful failure.”  The piece was stamped with the words “Not a Clone” to make the meaning clear.

For, if you look at the performance since inception, it has swamped the massive flagship PIMCO fund (PTTAX) that it was expected to mirror.  Check out the statistics for the two vehicles in Rowland’s posting.  You don’t get an R-squared of 0.486 if you are cloning something.

The other lines on the chart are the DoubleLine Total Return Bond Fund (DLTNX) — for the inevitable Gross/Gundlach comparison — and the ETF tracking the Barclays Aggregate (AGG).

At last count, BOND had $4.3 billion in assets.  We’d all like to fail in that fashion.  PIMCO has played the game brilliantly.  It has emerged as the leader in active ETFs by leveraging the history of the mutual fund for marketing clout and then beating it soundly out of the box.

Masterful.  Although, I would like to do a transactions analysis on the two vehicles.  (Chart:  Bloomberg terminal.)

the illusion of certainty

Throughout the investment world, the illusion of certainty is a powerful force.