ETF to Challenge Money-Market Funds  

Posted at 6:00 am in Feature
In the latest challenge to the mutual fund industry, Pimco has launched the Enhanced Short Maturity Strategy Fund(MINT) to compete with money-market funds.
The new ETF, which Pimco notes is “intended to be a higher yielding alternative to money market funds,” is actively managed and will primarily invest in short-duration investment-grade debt securities.
While a number of other bond ETFs, such as the Vanguard Short-Term Bond Fund(BSV), the iShares Barclays 1-3 Year Treasury Bond Fund(SHY), the SPDR Barclays Capital 1-3 Month T-Bill ETF(BIL), the WisdomTree U.S. Short-Term Government Income Fund(USY) and Pimco’s own 1-3 Year U.S. Treasury Index Fund(TUZ) currently provide investors with exposure to short-maturity fixed-income instruments, the aim of MINT is to challenge money-market mutual funds such as Fidelity’s Cash Reserves(FDRXX).
Seeing money-market yields hovering near zero, Pimco hopes to use its proven fixed-income prowess to promise stronger returns. Although MINT will mainly hold the same assets as other money-market funds, the instrument is also open to holding longer-maturity bonds and other investment-grade fixed-income securities to meet this goal.
While this fund is yet to prove its effectiveness, with a low 0.35% net expense ratio, MINT may become a strong contender among veteran money-market mutual funds if it can successfully achieve the returns it promises.
Thus far, MINT appears to have stirred up some investor interest. Since it was launched last week, MINT has had an average daily trading volume of 18,950 shares. This level of trading is solid for a new fund, and especially notable since many actively-managed ETFs have struggled to garner interest in the past.
While mutual fund investors are required to earmark funds for tax purposes, ETF investors often pay capital gains taxes only when the funds are sold. These tax advantages, along with the transparency inherent to the ETF structure, have helped to drive many investors from mutual funds to ETFs.
Pimco’s latest offering could help to bolster investor interest in actively-managed bond ETFs. As of October, existing actively managed bond ETFs have only managed to attract $25 million in aggregate assets. Pimco’s high-profile brand name, and reputation as a giant in the bond industry, could help to bring recognition to the actively-managed ETF universe.
MINT is managed by Jerome Schneider, an executive vice president in Pimco’s Newport Beach office who joined PIMCO in 2008. Before joining PIMCO, Schneider was a senior managing director with Bear Stearns specializing in credit and mortgage-related funding transactions.
From fixed income products to emerging markets investments, ETFs are canvassing the investment universe with low-cost alternatives to traditional mutual funds. MINT is the first of five planned active ETFs from PIMCO, and this fund will certainly be one to watch.

In the latest challenge to the mutual fund industry, Pimco has launched the Enhanced Short Maturity Strategy Fund(MINT) to compete with money-market funds.

The new ETF, which Pimco notes is “intended to be a higher yielding alternative to money market funds,” is actively managed and will primarily invest in short-duration investment-grade debt securities.

While a number of other bond ETFs, such as the Vanguard Short-Term Bond Fund(BSV), the iShares Barclays 1-3 Year Treasury Bond Fund(SHY), the SPDR Barclays Capital 1-3 Month T-Bill ETF(BIL), the WisdomTree U.S. Short-Term Government Income Fund(USY) and Pimco’s own 1-3 Year U.S. Treasury Index Fund(TUZ) currently provide investors with exposure to short-maturity fixed-income instruments, the aim of MINT is to challenge money-market mutual funds such as Fidelity’s Cash Reserves(FDRXX).

Seeing money-market yields hovering near zero, Pimco hopes to use its proven fixed-income prowess to promise stronger returns. Although MINT will mainly hold the same assets as other money-market funds, the instrument is also open to holding longer-maturity bonds and other investment-grade fixed-income securities to meet this goal.

While this fund is yet to prove its effectiveness, with a low 0.35% net expense ratio, MINT may become a strong contender among veteran money-market mutual funds if it can successfully achieve the returns it promises.

Thus far, MINT appears to have stirred up some investor interest. Since it was launched last week, MINT has had an average daily trading volume of 18,950 shares. This level of trading is solid for a new fund, and especially notable since many actively-managed ETFs have struggled to garner interest in the past.

While mutual fund investors are required to earmark funds for tax purposes, ETF investors often pay capital gains taxes only when the funds are sold. These tax advantages, along with the transparency inherent to the ETF structure, have helped to drive many investors from mutual funds to ETFs.

Pimco’s latest offering could help to bolster investor interest in actively-managed bond ETFs. As of October, existing actively managed bond ETFs have only managed to attract $25 million in aggregate assets. Pimco’s high-profile brand name, and reputation as a giant in the bond industry, could help to bring recognition to the actively-managed ETF universe.

MINT is managed by Jerome Schneider, an executive vice president in Pimco’s Newport Beach office who joined PIMCO in 2008. Before joining PIMCO, Schneider was a senior managing director with Bear Stearns specializing in credit and mortgage-related funding transactions.

From fixed income products to emerging markets investments, ETFs are canvassing the investment universe with low-cost alternatives to traditional mutual funds. MINT is the first of five planned active ETFs from PIMCO, and this fund will certainly be one to watch.

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Written by admin on November 24th, 2009

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