NEW YORK (TheStreet) --The big news from fund giant Pacific Investment Management Co. last week was the surprise resignation of CEO Mohamed El-Erian. Lost in the big news was the launch of the PIMCO Diversified Income ETF (DI) .

DI is an actively managed fund with the big benefit of flexibility on the part of the managers to choose what parts of the bond market the fund allocates to. The importance of flexibility is that the bond market has become much more complicated to invest in.

The Federal Reserve's policies of zero interest rates and asset purchases -- while perhaps necessary -- have distorted the bond market. The 10-year Treasury went to an unimaginably low 1.5% in July 2012, and even as it has flirted with 3% during the last few months, it is still historically low.

Most market participants have generally accepted that rates are likely to go higher soon, but last week's still unfolding Argentine peso devaluation sent the 10-year yield down to 2.75%. The yield would likely go even lower if the Argentine currency move turns into a full-blown crisis.

After what many have referred to as a 30-year bull market for bonds, investors can no longer count on a smooth ride from a fund such as the iShares Core Total Aggregate Bond ETF (AGG) - Get iShares Core U.S. Aggregate Bond ETF Report, which was down 4.2% last year on a price basis.

An investor of an actively managed fund such as DI is expecting the manager, who in this case is 15-year Pimco veteran Curtis Mewbourne, to assess market conditions and successfully navigate the fund toward its objective, which is to provide access to the global credit sector of the bond market with an intermediate duration from a top-down management approach.

Mewbourne also manages the PIMCO Diversified Income Fund (PDVDX) , a traditional mutual fund. While Mewbourne is clear that DI shouldn't be expected to have the same performance, both funds share the same objective and strategy.

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A comparison of the holdings between the exchange-traded fund and traditional mutual fund reveals that at least for now the two funds are different. DI has a concentrated portfolio of 44 positions, compared with more than 1,500 holdings for PDVDX, and the country weightings diverge noticeably as of PDVDX's last report.

The mutual fund version, which has $5.5 billion in assets, has been trading since 2005, according to Morningstar, which rates the fund at four stars.

It is possible that the reason the two funds look so different is because DI has only $22 million; arguably, it may not be economical for fund holders if Pimco put 1,500 holdings into a fund that is so relatively small. As DI increases its asset base, then perhaps the two funds will be more similar.

If that happens, then holders of PDVDX may want to consider a switch to the ETF for the advantage of portfolio transparency. ETF holdings are updated daily, whereas Morningstar's portfolio data on PDVDX is dated last Sept. 30.

At the time of publication, the author held no positions in any of the funds mentioned.


This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.