Thanks to the Securities and Exchange Commission, Bill Gross' soon-to-debut exchange-traded mutual fund version of Pimco Total Return [profile] may fail to track the original's performance in at least one way. Reuters' Jessica Toonkel reports that the SEC "has issued a temporary moratorium on approving any new ETF products that use derivatives, pending an SEC review of whether derivative use by ETFs is too risky."

The original, $244-billion Total Return mutual fund can use derivatives "without limitation."

FUSE Research Network Sam Campbell hinted to Reuters that keeping derivatives out of the ETF might be a positive, given the prominence of derivatives in the recent financial crisis and given the transparency issues that stem from derivatives. Yet other sources told Reuters that Total Return needs derivatives because of its gargantuan size, and while the ETF might not be huge at first, the lack of derivatives could be a bigger issue if the ETF is a big success.

Gross plans to launch the new ETF on March 1 [see MFWire.com, 1/10/2012]. 

Edited by: Neil Anderson, Managing Editor


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