Happy 15th Anniversary MINT

MINT, which celebrated its 15-year anniversary in mid-November, pulled in more than $1 billion year-to-date through November. While PIMCO  has continued to expand their ETF lineup, MINT is the largest with approximately $12 billion in assets.

VettaFi connected with Greg Hall, PIMCO head of U.S. global wealth management, to learn more about how advisors are using MINT and why PIMCO thinks active management is important when investing in bonds. PIMCO will be joining VettaFi for the 2025 Market Outlook Symposium taking place on December 10. Register to benefit from their expertise. 

VettaFi: Happy 15-year anniversary. How has the bond market and bond ETF market changed since you launched? 

Hall: Launched during the 2008–09 financial crisis, MINT was designed to address the acute need for effective liquidity management and return needs of that period. Its innovative active management approach was a fresh concept at the time, and clients quickly recognized its potential, investing significant capital right from the start.

Since then, both the bond and bond ETF markets have evolved dramatically. We’ve seen a much wider array of bond ETFs across various fixed income sectors, democratizing access for investors in areas that were previously difficult to access. For example, PIMCO introduced the first active municipal bond fund, the PIMCO Intermediate Municipal Bond Active ETF (MUNI B+), shortly after MINT’s launch.

As bond ETF adoption has grown, bond trading has become much more efficient. Bond ETFs have demonstrated resilience during multiple market stress episodes, contributing to enhanced market quality and reinforcing their durability and value in investors’ portfolios.

VettaFi: We are still to see advisors rethink their cash allocation given the onset of the rate cutting cycle. What should they know? 

Hall: As the Federal Reserve cuts interest rates, advisors are recognizing that traditional savings vehicles are no longer as attractive for their clients as they have been for the last few years. For example, many cash equivalents like money market funds or CDs typically see their yields fall in lockstep, or even more so, with the Federal Reserve rate policy. This happens without benefiting from potential capital appreciation that can come from taking a step out the risk spectrum such as with ultra-short funds like MINT. Consequently, many are re-evaluating their clients’ “true liquidity needs” and exploring other options to potentially maximize returns in the current environment.

Something our clients have found helpful is a liquidity tiering framework. This helps to identify 1) the specific timelines for their clients’ cash needs, and 2) where they can reallocate to higher-yielding, less liquid investments that could enhance return potential for a modest to slightly more elevated increase risk. 

For instance, if a client is saving for a car purchase in six months, they might allocate that cash to a higher-yielding, short-term oriented ETF like MINT. For goals that are still short-term but a year away, an ETF like the PIMCO Enhanced Low Duration Active ETF (LDUR B) could be an option, allowing for potential capital appreciation while maintaining a relatively low risk profile.

VettaFi: PIMCO has long believed bonds are different and that advisors should leverage active management. Can you share how this applies with ultra short term investing? 

Hall: Over the rolling 10-year periods (net of fees) ending September 30, 2024, 64% of active bond funds outperformed the median passive peer, and that number jumps to 79% for PIMCO active bond funds.* 

Specifically in short term, active management gives us a few levers to seek to build better portfolios for investors:

1. Security Selection: With active management, we can optimize portfolios by selecting maturities beyond traditional money market funds and seek to identify “rising stars” before rating agencies formally upgrade them. We are also able to tilt sectors based on relative value.
2. Volatility Exploitation: We can strategically buy and sell options to seek to capitalize on market volatility, allowing us to enhance returns potential while maintaining a focus on risk management.
3. Yield Curve Positioning: Our ability to adjust positions along the yield curve as market conditions evolve helps ensure that we can respond proactively to changes.
4. Forward-Looking Strategy: By managing interest rate risk based on our economic outlook, we provide a forward-thinking approach that prioritizes capital preservation.

VettaFi: Heading into 2025, how are you positioning MINT? Where is the risk being rewarded? 

Hall: Across our short term suite, we see opportunity in securitized assets that are high quality (usually AAA) and are backed by high-quality assets such as consumer loans, auto receivables and mortgage-backed bonds.  

We are more cautious on generic corporate debt, favoring high-quality assets, and established names within the financial and banking sector. 

This diversified portfolio structure allows MINT to seek maximum current income, but to do so while meeting intermediate term liquidity needs and exhibiting a lower correlation to traditional corporate or equity risk. 

MINT remains tactical in its interest rate positioning, adapting to the changes in expectations for future policy from the Federal Reserve.

For more news, information, and strategy, visit VettaFi | ETFDB.

*Source: PIMCO and Morningstar as of 30 September 2024. *Active outperformance compares the performance of actively managed funds (net of fee) versus the median passive peer (net of fees) over 10 year periods. The average magnitude of outperformance over the 10 year periods is annualized. Past performance is not a guarantee or a reliable indicator of future results. “PIMCO Bond Funds” represents all PIMCO mutual funds and active ETFs in the Morningstar U.S. Taxable Bond and Municipal Bond Categories. “Active Bond Funds” represents actively managed mutual funds and ETFs in the Morningstar U.S. Taxable Bond and Municipal Bond Categories. Performance does not take into account the maximum initial sales charge and would be lower if it did. The net returns of Active Bond Funds and PIMCO Bond Funds were compared against the median net returns of passive peers in each 10-year rolling period between 9/30/2004 and 9/30/2024 when both the funds being analyzed and the passive peers were present. Passive peers are mutual funds and ETFs classified as an “index fund” or an “enhanced index fund” in the same Morningstar category as the funds being analyzed. Oldest share class net returns are used for analysis. Results would vary if a different share class was selected. Different fund types (e.g. ETFs, open-end investment companies) and fund share classes are subject to different fees and expenses, which may affect performance, have different investment objectives, may have different minimum investment requirements, and may be entitled to different services.