ETFs for Cash Hoarders

There is something to be said for investors keeping some dry powder. Mohamed El-Erian endorsed the idea earlier this week, saying the bulk of his portfolio is in cash.

But for investors looking to main some semblance of income, liquidating equity and fixed income holdings in favor of cash can be a risky gambit. Some exchange traded funds can help investors smooth the move to increased cash holdings.

“These ETFs live in the space between money-market funds and short-term bond funds. They generally hold all investment-grade bonds from a variety of issuers with weighted average maturities of around a year or less,” reports Eric Balchunas for Bloomberg.

The king of the “cash is king” ETFs is the PIMCO Enhanced Short Maturity ETF (NYSEArca: MINT). Managed by PIMCO Managing Director Jerome Schneider, the $3.68 billion MINT is the largest actively managed ETF.

MINT’s 30-day SEC yield of 0.69% is not jaw-dropping, but that is the tradeoff for a low duration ETF comprised of highly-rated holdings. MINT’s effective duration is just 0.35 years, according to issuer data.

There are regulatory concerns and rules changes to consider with money market funds, including ETFs and mutual funds. Earlier this year, the Federal Reserve expressed concern that money market mutual funds and exchange traded funds could be vulnerable to stress during calamitous market environments. [Fed Concerned About Money Market Funds]