PIMCO Launches Actively-Managed Short Maturity ETF

by on November 17, 2009 | ETFs Mentioned:

Newport Beach, California-based PIMCO announced Tuesday the launch of its first actively-managed bond ETF, the Enhanced Short Maturity Strategy Fund. The new ETF will trade on the NYSE Arca Exchange under the ticker MINT and charge expenses of 0.35%. MINT is intended to be a higher yielding alternative to money market funds, and will invest primarily in short duration investment grade debt securities. MINT will not include options, futures, or swaps in its holdings.

The Denver MintThe new PIMCO ETF will be managed by Jerome Schneider, deputy head of the company’s money market desk. “Investors are holding a lot of cash, and are compelled to look for something beyond the near-zero yields that money market funds offer,” said Schneider. “MINT aims to maximize investors’ current income by accessing PIMCO’s discipline, risk management and market expertise within a highly liquid and transparent ETF.” MINT will be managed in the mold of  countless other PIMCO bond funds, relying on both a top-down analysis of financial, political, and social trends as well as a bottom-up credit analysis.

With the federal funds rate close to zero (and expected to remain there for the foreseeable future), holding cash in money market strategies has yielded less than enhanced cash investment strategies, opening the door for a fund to both preserve capital and attempt to deliver more attractive returns on cash investments. According to its fact sheet, MINT will be benchmarked to the Citigroup 3-Month Treasury Bill Index, an unmanaged index representing monthly return equivalents of yield averages of the last 3 month Treasury Bill issues.

Growing Space

MINT is the first actively-managed bond ETF from PIMCO, but it hits the market more than 18 months after PowerShares broke ground in the space with its Active Low Duration Fund (PLK). PLK is benchmarked against the Barclays Capital 1-3 Year U.S. Treasury Index, meaning that these two funds likely won’t compete directly.

WindomTree’s U.S. Short-Term Government Income Fund (USY) is another actively-managed bond ETF investing in very short term, high quality debt securities. USY is benchmarked against the Merrill Lynch 0-1 Year Treasury Index, and at the end of the third quarter had an average of 178 days to maturity. MINT will be just slightly more expensive than both PLK (30 basis points) and USY (25 basis points).

Existing actively-managed bond ETFs have been slow to gain traction, holding less than $25 million in aggregate assets as of October. But PIMCO’s arrival could give all of these funds greater visibility among investors, particularly if they continue to achieve success relative to their respective benchmarks.

To stay up to date on all the developments in the actively-managed ETF space, sign up for our free ETF newsletter.

Disclosure: No positions at time of writing.