In late cycle “toppy” markets, many investors instinctively turn to traditional cash investments to seek safety and wait out the storm. But too often investors over-allocate to inefficient products and under-estimate the time horizon of the investment.
On the upcoming webcast, Don’t Let Your Cash Get “Swept” Away, Jerome Schneider, PIMCO’s Head of Short-Term Portfolio Management, will explore an alternative approach to liquidity tiering, uncover opportunities at the front end of the curve, and help investors manage portfolio volatility without giving up the prospect of attractive risk-adjusted returns.
Investors can look to the actively managed PIMCO Enhanced Short Maturity Active ETF (NYSEArca: MINT) to provide additional yield beyond cash holdings. MINT is meant to be used as an incremental step outside of the money market funds.
MINT seeks greater income and total return potential than cash and money market funds by investing in a broad range of high-quality short-term instruments, according to PIMCO.
The PIMCO Enhanced Short Maturity Active ETF comes with a 2.13% 30-day SEC yield and has a 0.64 year effective duration. The average portfolio duration of this fund will vary based on PIMCO’s market forecasts and will normally not exceed one year.
However, potential investors should keep in mind that the relatively more attractive yield generation offered by MINT comes with some added risks. The fund’s underlying holdings include 59.5% investment-grade credit followed by 22.0% securitized debt and 11.2% net other short-duration instruments.
The fund also includes global debt exposures, with a hefty 69.7% U.S. component, followed by 7.6% United Kingdom, 7.3% Japan and 4.9% Canada, among others.
Additionally, credit quality exposures include government 13.7%, AAA 8.0%, AA+ 6.5%, AA 0.4%, AA- 3.0%, A+ 5.3%, A 10.1%, A- 10.3%, BBB+ 10.3%, BBB 10.2% and BBB- 6.8%.
Financial advisors who are interested in learning more about short-duration bond strategies can register for the Wednesday, November 20 webcast here.