Seeking Alpha

MINT: Ultra-Low Duration, Fixed-Income ETF

Juan de la Hoz
Long only, ETF investing, dividend investing
Summary

MINT is an ultra-low duration, fixed-income ETF meant to provide investors an alternative to cash, savings accounts, CDs and the like.

It currently yields 2.70%, quite a bit higher than the alternatives.

The fund also provides a comparable level of capital preservation, liquidity, risk and volatility when compared to its peers.

It provides higher returns without increasing investor risk, and as such, is a strong investment opportunity in this space.

The PIMCO Enhanced Short Maturity Active ETF (MINT) is one of the largest, most popular ultra-low risk and duration funds in the market today. It is a reasonably good investment opportunity for investors looking for cash, savings account, or CD alternatives, and compares somewhat favorably to its peers.

Fund Overview

MINT is an ultra-low duration, fixed-income ETF. The fund is benchmarked to the FTSE 3-Month Treasury Bill Index, and aims to achieve superior returns, lower volatility and comparable liquidity compared to said benchmark. As we shall soon see, MINT successfully accomplishes this goal, and as such, makes for a particularly strong investment opportunity in this space.

MINT itself is administered by PIMCO, the most well-known and successful fixed-income investment manager in the world, a huge positive for the fund and its shareholders. The fund's overall investment strategy is remarkably simple. It invests in only the highest-yielding, lowest-risk, low-duration, fixed-income securities in the world, with the intent of maximizing returns while ensuring the preservation of shareholder capital and maximum liquidity. MINT focuses on investment-grade credit instruments, mostly bonds from large-cap, blue-chip American corporations, but invests in a wide, diversified array of alternative securities as well:

(Source: MINT Factsheet)

As mentioned previously, most of these securities are either investment grade or securitized, and so, carry very little credit risk:

(Source: MINT Corporate Website)

MINT's holdings have an effective duration of 0.20 years, or 2.4 months, which compares favorably to the fund's benchmark and minimizes interest rate risk:

(Source: MINT Factsheet)

The holdings themselves are also incredibly diversified, with only U.S. treasury notes accounting for a sizable portion of the fund's total holdings:

(Source: MINT Corporate Website)

MINT's holdings are all extremely low-risk securities, so the fund's price is generally remarkably stable. The fund usually trades on a very narrow band and has never experienced any wild swings in the share price. MINT's price has oscillated between $101 and $101.8 for the past five years or so. The fund has also never traded below $100 since inception:

ChartData by YCharts

It experiences a bit more volatility when compared to treasuries themselves, but overall risk and volatility is incredibly low, significantly smaller than that of the broader equities market:

ChartData by YCharts

As mentioned previously, MINT is a fund for investors looking for capital preservation first and foremost, and the fund does seem to deliver on that.

MINT has also been successful in delivering shareholder returns and value, with the fund outperforming its benchmark by about 1% since inception. The fund has, however, performed much more in line with its benchmark for the past year or so:

(Source: MINT Factsheet)

In my opinion, and taking into consideration the fund's past performance, MINT is a great investment opportunity for investors looking for short-term places to park their cash. Having said so, there are quite a few funds in this space which offer comparable value propositions, which brings me to my next point.

Peer Comparison

I decided to compare MINT to four other popular low-duration, low-risk, fixed-income ETFs:

  • iShares Short Maturity Bond ETF (NEAR)
  • Invesco Ultra Short Duration ETF (GSY)
  • JPMorgan Ultra-Short Income ETF (JPST)
  • SPDR Bloomberg Barclays 1-3 Month T-Bill ETF (BIL)

MINT generally achieves marginally lower total shareholder returns when compared to its peers. The differences are small, but material for low-duration funds:

ChartData by YCharts

The difference in returns is explained by two key factors.

First is the fact that MINT has a marginally higher expense ratio when compared to its peers. Higher expenses directly decrease shareholder returns, so this is undoubtedly a negative for the fund and its investors:

(Source: Seeking Alpha - Chart by Author)

Second is the fact that MINT's holdings have the lowest effective duration out of its peers. This, combined with the fund's larger number of holdings and significantly greater size, means that MINT offers significantly lower risk and volatility when compared to its peers:

(Source: MINT Corporate Website - Chart by Author)

MINT offers the lowest risk, but also the lowest reward, of its peers. This is a reasonable value proposition, especially considering the type of investor that might be interested in a fund like MINT.

Conclusion

MINT offers investors a higher-yielding alternative to cash, savings accounts, and CDs, while ensuring comparable levels of capital preservation, risk, volatility, and liquidity. The fund's peers are comparatively higher-risk higher-reward funds, but the differences are quite small. I think that MINT makes for a rather good fund for investors looking for a place to park their cash, but I can't really say it is much better than its competition.

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.