MINT has capitalized on uncertainty surrounding the money market fund business in the wake of the financial crisis and the Lehman Brothers bankruptcy. In Setember 2008, the Reserve Primary Fund “broke the buck” as a result of losses on Lehman paper. The news triggered a run on money market funds and forced the U.S. Treasury to insure all money market deposits.
“The realization that money market funds are really banks in disguise has led regulators to restrict the funds from owning too many illiquid or high-yielding cash instruments. Combine this with the lowest interest rates in generations and regulators on the warpath to reform the MMF industry, and you have a doomed business model. Enter PIMCO Enhanced Short Maturity Strategy (MINT),” says Morningstar analyst Samuel Lee in a report on the ETF.
“The fund is an unabashed piece of regulatory arbitrage. It’s designed to skirt money market fund rules, allowing it to own the securities just beyond the bright line that regulators have drawn,” he added. “There’s value in that in-between land that’s too long for most MMFs and too short for most short-duration bond funds. One, however, must never forget that MINT is not a MMF. It does not guarantee a fixed price level. It’s also not too big to fail, so don’t expect the government to ride to the rescue should it need rescuing.”
MINT charges an expense ratio of 0.35%.
