Vanguard Overtakes PIMCO in Bond ETF World

After leading the bond market for the past several years, PIMCO finally lost its position as the world's largest bond mutual fund provider to Vanguard. This is primarily thanks to the departure of Bill Gross last year that led to massive outflows from PIMCO funds.


According to the reports, investors shed $5.6 billion from the PIMCO Total Return ETF (NYSEARCA:BOND) in April, following $7.3 billion in March and $8.6 billion in February. The withdrawals pulled down the total AUM to $110.4 billion at the end of April. This is much below the Vanguard Total Bond Market ETF (NYSEARCA:BND), which had total AUM of $117.3 billion as of April 30. In fact, the ultra-popular PIMCO Total Return ETF now has just nearly $2.7 billion in AUM.


Beyond PIMCO's downfall, the success of Vanguard could be traced to its low-cost products and commission-free trades. The expense ratio of Vanguard products is 76% less than the industry average. Further, the growing appeal of the passively managed fund that tracks the indices or other benchmarks has helped Vanguard to become the largest mutual bond fund provider in the world. Earlier in the year, Vanguard overtook Boston-based State Street Global Advisors to become the second-largest ETF sponsor.

That being said, we have taken a closer look at some of Vanguard's largest bond funds for investors seeking to take advantage of the index-based strategy. Investors should note that about one-fourth of Vanguard's total asset base came from the ultra-popular Vanguard Total Bond Market ETF, followed by $15.9 billion in the Vanguard Short-Term Bond ETF(NYSEARCA:BSV) and $9.9 billion in the Vanguard Short-Term Corporate Bond Index ETF (NASDAQ:VCSH).

BND in Focus

This fund provides exposure to various corners of the bond market by tracking the Barclays Capital U.S. Aggregate Float Adjusted Index. It holds a large basket of 7,477 securities with effective maturity of 7.80 years and average duration of 5.60 years. From a bond type look, federal debt accounts for about 47% of the portfolio, while corporates and collateralized securities account for the rest (see: all the Total Bond market ETFs here)