PIMCO's new exchange-traded fund: Cheaper Bill WITH $250 billion in assets, PIMCO Total Return is the world's biggest mutual fund. Morningstar, a research firm, named Bill Gross, who oversees it, its bond manager of the 2000s. He struggled last year but has begun 2012 better. Unless you have the $1m required for the institutional shares, the fund isn't cheap. PIMCO charges 0.6% a year for its standard "A" share. Investors must pay a further 0.25% in annual distribution and marketing costs and 3.75% upfront to their brokers. The price is about to go down. On March 1st PIMCO will launch the portfolio as an exchange-traded fund (ETF). Unlike mutual funds, ETFs change hands on public markets. PIMCO will charge just 0.55% a year for the ETF. And investors will incur far lower brokerage costs. Buying an ETF costs a trivial commission of $10 or so, plus the gap between a marketmaker's bid and ask prices. For heavily traded funds, this can be a mere penny a share. If the fund repeats its average return over the past decade, then an investor buying $10,000-worth of "A" shares would lose 76% of his profits to expenses during the first year of ownership. The ETF's costs would eat up just 12%. PIMCO's move is striking not just because of the fund's size and fame but also because the ETF is actively managed. Most ETFs are passive index-trackers which report their positions every day. But mutual funds disclose their holdings only four times a year, and their managers often say such secrecy is necessary. If they had to reveal trades in progress, they say, nimbler buyers might snap up the shares first and raise the cost. That worry is less of a concern for the Total Return fund: Mr Gross buys very liquid bonds, which are less vulnerable to such "front-running," and announces many positions publicly. And for PIMCO the ETF offers new ways to build the fund by attracting more price-conscious investors and opening it up to non-Americans, who cannot buy mutual funds in the United States. For mutual-fund middlemen, however, the product is a threat. Armies of brokers and salespeople depend on purchase and distribution fees. And others are interested in the idea of active ETFs, too. BlackRock, a big fund manager, has already asked the government to approve "non-transparent" ETFs with looser disclosure rules. Watch this space.