Bloomberg on Cash, ETFs
Bloomberg's Businessweek reports on "cash-like" ETFs in the story, "Tempted to Mimic Mohammed El-Erian's Move Into Cash? Check Out These ETFs." It says, "The news that Mohamed El-Erian has his portfolio largely in cash has many investors wondering if they should follow suit. But what may make sense for a megamillionaire's portfolio isn't necessarily a good move for people with much more modest holdings.... But if average investors are tempted to move some money out of the market, actively managed "enhanced" money-market exchange-traded funds may be a good option. These ETFs offer a way to earn some income and ward off any bite from inflation without taking on much risk. 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. The largest actively managed ETF of the bunch is the Pimco Enhanced Short Maturity Active Exchange-Traded Fund (MINT). It has 70 percent of its assets in corporate bonds and 16 percent in mortgage bonds; the rest is in U.S. treasuries and municipal bonds. Half of its holdings are outside the U.S., in bonds from South Korea, the United Kingdom, and Switzerland. That mix of holdings adds up to a yield of 0.80 percent, and the ETF returned 0.60 percent in the past year, after fees.... MINT charges 0.35 percent in annual fees. Blackrock's answer to MINT is the iShares Short Maturity Bond ETF (NEAR). It focuses almost entirely on U.S. government debt but picks up yield by holding some bonds with maturities between one and three years. That combination produces a yield of 0.84 percent and a one-year return of 0.74 percent after fees. NEAR has $626 million in assets and an annual fee of 0.25 percent. Further out on the risk spectrum is Guggenheim Enhanced Short Duration ETF (GSY), which has a 1.4 percent yield and a one-year return of 0.93 percent, after fees. GSY manages to earn that by adding 15 percent in high-yield debt to a portfolio of mostly investment-grade corporate and government bonds that mature in less than a year. It charges investors 0.27 percent of assets under management." (Look for more coverage of the ultra-short bond and ETF market in our next Bond Fund Intelligence, which will ship to Crane Data subscribers next week.) In other news, the Federal Reserve released the Minutes from its March 17-18 FOMC meeting. (Watch for excerpts and its comments on rates and the RRP program tomorrow.)
