It would also potentially boost the appeal of short-duration ETFs such as 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). These ETFs have a fluctuating NAV.
“The SEC ratcheted down money market fund risk. This ETF avoids much of that regulation, allowing it to earn potentially higher returns,” Morningstar says in a profile of MINT, the PIMCO fund.
Also, Charles Schwab (NYSE: SCHW) has filed to launch its own short-duration bond ETF that would be actively managed.
Schwab’s planned ETF is “the latest sign that U.S. fund managers see ETFs as the heirs to money market funds,” the Financial Times reported Thursday. “The emergence of short-term ETFs coincides with a heavy gloom gripping the money fund industry.”
Proposed reforms such as requiring the funds to abandon their stable NAV policy and building up capital reserves “are liable to cost the funds business,” the newspaper said.
“The short-term ETF forays suggest Schwab and others are hedging their bets on a money fund revival,” it added.