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When it comes to actively managed exchange traded funds, the most widely discussed themes include fixed income and the ability of active managers to make headway in that asset class.
Helped in large part by the conversions of a slew of actively managed mutual funds to the ETF wrapper, the landscape of the largest actively managed ETFs is increasingly populated by equity funds, but it is also still dominated by bonds. The Pimco Enhanced Short Maturity Active ETF (MINT) is among the products that got that ball rolling.
MINT, the ETF counterpart to the Pimco Short-Term (PTHSX), turns 15 years old next month and is now an $11.7 billion juggernaut. Just eight actively managed ETFs are larger than MINT based on assets under management.
Impressive data points to be sure, but some advisors and investors may think that against the backdrop of the Federal Reserve lowering interest, enthusiasm for short duration fare will wane and MINT doesn’t merit attention over the near-term. Actually, the opposite could prove true and MINT’s active management could be advantageous for income-hungry clients moving forward.
Process, Track Record Matter
No, past performance isn’t a promise of future returns, but MINT’s long-term track record is impressive. Remember, this is a 15-year-old ETF and its mutual fund counterpart was born in 1987. So the strategy and managers led by Jerome Schneider are battle-tested.
“The strategy’s time-tested approach, with a focus on short-term and liquidity markets, stands out. Strong decisions and consistent inputs further support the strategy’s liquidity and capital preservation objectives,” notes Morningstar analyst Paul Olmsted. “The team doesn’t hesitate to use its vast global toolkit, which is broader and more sophisticated than most peers. The comanagers take their top-down cues from Pimco’s macroeconomic forecasts and lean on sector specialists to construct a portfolio that aims to maximize yield and total return potential.”
Advisors examining MINT’s tale of the tape are apt to like what they see. The ETF sports a 30-day SEC yield of 4.98% with a duration of just 0.19 years. That implies minimal sensitivity to changes in interest rates, but also that MINT could be a credible alternative to CDs or money markets, particularly as rates decline.
That tempting yield is helped by the manager’s ability to build MINT’s portfolio with 70% to 90% investment-grade corporates. Managers typically eschew junk bonds, emerging markets debt and non-dollar fare in an effort to minimize risk.
MINT Embodies Consistency
MINT is an income preservation/income-generating tool with the potential to reduce volatility in a broader portfolio – traits many advisors will find appealing.
Said another, MINT isn’t flashy, but it is consistent. Long-term performance data confirm as much, underscoring the point that in investing, there’s nothing wrong with hitting singles and doubles.
“The ETF’s long-term results hold up versus more aggressive peers,” concludes Olmsted. “Over Schneider’s tenure since December 2009, the strategy’s 1.78% annualized return through September 2024 beat its distinctive ultrashort bond category median’s 1.73%, a second-quartile showing. Risk-adjusted results, as measured by the Sharpe ratio, were slightly better than its peer median.”
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