Short-Duration ETFs vs. Money Market Funds | ETF Trends

Short-duration ETFs give investors a relatively safe place to park cash but they shouldn’t expect much in the way of yield with interest rates so low.

ETFs in this category include PIMCO Enhanced Short Maturity Strategy (NYSEArca: MINT), SPDR Barclays 1-3 Month T-Bill (NYSEArca: BIL), iShares Barclays Short Treasury Bond (NYSEArca: SHV) and Guggenheim Enhanced Short Duration Bond (NYSEArca: GSY).

MINT is an actively managed ETF from PIMCO that holds $1.9 billion of assets. It has a 30-day SEC yield of 0.75%.

Short-duration ETFs tracking indices are “about as safe an investment as a long-term investor can make,” says Morningstar analyst Timothy Strauts.

Since they track the very short end of the bond market, they offer very low interest payments.

“The yield is very similar to money market yield, and there is little opportunity for capital appreciation,” Strauts wrote in an analyst report.

“With many money market bank accounts paying just a small fraction of a percent in interest, investors continue to look for similar safe investments that provide a better yield,” writes David Zanoni at Seeking Alpha.