Pimco Enhanced Short Maturity Active ETF Aims to Maximize Yield and Returns

Pimco Enhanced Short Maturity Active ETF’s MINT veteran liquidity-focused ultrashort managers use the firm’s full toolkit to execute this time-tested process, making it a top option among its peers. This exchange-traded fund’s mandate is more constrained than that of its sibling Pimco Short-Term PTSHX.

Jerome Schneider leads this deep, dedicated team of ultrashort specialists. He has continued to develop the team since he assumed leadership of Pimco’s short-term desk in 2010. While Schneider is the face of the firm’s short-term strategies, he relies on comanagers Andrew Wittkop and Nate Chiaverini, Pimco veterans who bring specialties in rates and derivatives, and corporate credit, respectively. This is a highly collaborative team, and the addition of these comanagers in July 2021 added depth and lessened key-person risk. They do not want for resources and draw on the firm’s extensive global investment team of analysts, traders, macroeconomic experts, and risk managers.

This time-tested process stands out. Focusing only on short-term and liquidity markets, strong collaboration, and consistent inputs supports the strategy’s liquidity and capital preservation objectives. The team has a large toolkit and it doesn’t hesitate to use it, but the ETF avoids non-investment-grade paper, non-U.S. developed debt, and foreign currencies. After taking cues from Pimco’s macroeconomic forecasts, the team works to construct a portfolio with securities that aim to maximize yield and total return potential. It draws on large corporate and structured products research teams to form its bottom-up decisions, as investment-grade credit and securitized debt are featured prominently and contribute to its yield advantage versus peers. Emerging-markets debt complements its core portfolio but is only used sparingly. The team uses the full range of its zero- and one-year duration band. In 2022, the team expanded its ability to use U.S. Treasury futures to better manage interest-rate risk. While this adds complexity, this team has proved its ability to effectively manage these instruments.

The ETF’s extra precautions versus Pimco Short-Term may cause it to lag during markets that reward competitors that take more credit and liquidity risk. Since Schneider’s first full month in December 2011, the ETF’s 1.4% annualized gain through July 2023 narrowly beat its unique ultrashort bond Morningstar Category peer median, placing it ahead of three fifths of rivals. Adjusted for volatility, results are only average; its Sharpe ratio, a measure of return relative to standard deviation, landed slightly ahead of its median rival. While its approach has resulted in higher volatility in stressed times than the category norm, its long-term volatility is near that of its median peer.