Tag Archives: surely-intrigue

By Alan Gula Pacific Investment Management Co. (PIMCO) is facing an investor confidence crisis. The storied bond firm experienced over $150 billion of mutual fund outflows in 2014. And PIMCO’s flagship Total Return Fund is now 54% smaller than it was at its peak in April 2013, when assets under management (AUM) reached $293 billion. The exodus intensified after the abrupt and unceremonious departure of Co-Founder Bill Gross in September 2014. But one firm has benefited greatly from the turmoil at PIMCO : DoubleLine Capital. Headed by Jeff Gundlach, DoubleLine saw its 13th consecutive month of net inflows in February, following a record monthly net inflow in January. With good reason, Gundlach is being hailed by many as the new “bond king.” And just last week, Gundlach’s DoubleLine launched its first exchange-traded fund (ETF), which will surely intrigue fee-conscious fixed-income investors. DoubleLine has partnered with ETF pioneer, State Street Global Advisors, to offer the SPDR DoubleLine Total Return Tactical ETF (NYSEARCA: TOTL ). DoubleLine’s lineup includes successful open-end mutual funds and closed-end funds, but this is its first ETF. The firm will actively manage TOTL, allocating capital among different fixed-income sectors using a top-down macroeconomic approach and selecting securities via bottom-up analysis. With 114 funds, the ranks of actively-managed ETFs are growing. However, with under $20 billion in aggregate AUM, it’s still a nascent area. PIMCO’s Total Return ETF (NYSEARCA: BOND ) is perhaps the most popular actively-managed bond ETF and has $2.5 billion in AUM. Although bond fund investors are typically long-term oriented and don’t necessarily need intra-day trading liquidity, ETFs often carry lower fees than their mutual fund counterparts. This is the case with TOTL, which has a net annual operating expense of 0.55%. This compares favorably to the investor share class of the DoubleLine Total Return Bond Fund N (MUTF: DLTNX ), which carries a fee of 0.73%. The institutional shares levy a 0.48% expense ratio, but you’ll have to pony up $100,000 to meet the minimum investment requirement. DoubleLine’s Total Return Bond Fund outperformed 91% of its peers in 2014, according to Bloomberg data. Like DoubleLine’s flagship fund, TOTL is an intermediate-term bond fund… but its mandate is a bit broader. Investments can include Treasuries, mortgage-backed securities (MBS), domestic and foreign investment-grade corporate bonds, foreign government bonds, including emerging markets, floating rate securities, etc. The fund will maintain at least 20% of its assets in MBS or securities with government guarantees, whereas DLTNX aims to maintain MBS exposure of 50% or greater. DoubleLine’s tactical ETF may invest up to 25% of its net assets in high-yield bonds. The fund will target a lower duration (interest rate risk) than that of the benchmark Barclays U.S. Aggregate Bond Index. Therefore, a rising interest rate environment (which is not my forecast, but is possible) should have a muted impact. DoubleLine’s first ETF, and its latest in an array of quality offerings, is an exciting development for both the firm itself and fixed-income investors looking for additional fund choices and lower fees. At its peak, PIMCO managed over $2 trillion. At the end of 2014, DoubleLine managed a much smaller, but quickly growing, $64 billion. Of course, performance, not size, should be used as a yardstick for greatness. And there’s no doubt in my mind that DoubleLine is already a giant in the industry. Original Post