(Bloomberg) -- When it comes to ETFs, if you’re going to be expensive you’d better be famous.

Since losing star bond fund manager Bill Gross to Janus Capital in 2014, the Pimco Total Return Active ETF (BOND) is sinking, having hemorrhaged more than $1.4 billion in outflows. Compare that to a similar actively managed bond fund that’s retained its star power — Jeffrey Gundlach’s SPDR DoubleLine Total Return Tactical ETF (TOTL). It’s attracted $3.1 billion over the same period.

So Pimco is shaking things up yet again. Out are the current managers of the Total Return ETF, and in are three new faces. The plan is to shift BOND’s strategy to become closer to the popular Pimco Income Fund, the firm said in a statement.

The moves are likely a recognition of the elephant in the room in all asset management conversations these days, namely cost. The most successful bond ETFs are cheaper, passively managed funds like BlackRock’s iShares Core U.S. Aggregate Bond ETF (AGG). Just 5% of bond ETF assets on U.S. exchanges are actively managed, data compiled by Bloomberg show.

When it comes to active management, which inherently costs more for investors than buying passive funds, names matter, said Timothy Baker, director of product strategy at Symmetry Partners.


 “There were periods where Bill Gross did outperform the market and periods where he didn’t, but people kept putting money into the funds because they believed in him,” said Baker, whose firm oversees about $7.4 billion. “There are some things you need for a portfolio to be successful: good performance, competitive fees and it doesn’t hurt to have a star manager.”

Active strategies have long been billed as a more efficient way to run bond ETFs. Mangers can be more nimble navigating liquidity issues and use their own methods to pick higher-quality debt. That’s apparent in BOND, which has returned 9.9% over the past three years, versus 7.9% for the Bloomberg Barclays U.S. Aggregate Bond Index.

The trouble for Pimco is that in ETFs, asset gathering matters more than performance in keeping a fund viable. And investors continue to go the cheaper route.

For example, BlackRock’s aggregate bond fund charges 5 basis points compared with 55 basis points for BOND. Though the BlackRock offering returned just 0.6% over the past year, investors have poured in $9.5 billion. Meanwhile, BOND saw $626 million exit after posting a 3.2% return over the same time frame.

The DoubleLine ETF carries the same price tag of 55 basis points. But investors clearly have decided that Gundlach is worth the price. The fund has only seen one day of outflows since its launch in 2015.

“With an active ETF, the most important thing is going to be the three P’s: people, process and philosophy,” said Lance Humphrey, executive director of global multi-assets at USAA Asset Management. “It’s a really good thing that the industry has become more aware of fees. But in active fixed income, I would certainly be willing to pay a little more for a skilled management team.”

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