Morningstar Magazine - February/March 2018 - 52

Strategies

A Compelling Alternative to Cash
This ultrashort bond ETF has taken measured risks
to deliver strong performance.
BEST IDEAS: PASSIVE

Miriam Sjoblom

PIMCO Enhanced Short Maturity Active ETF MINT

This article is adapted from the ETF's Morningstar Global Fund Report dated
Dec. 13, 2017.

Stats 12/31/2017

PIMCO Enhanced Short Maturity Active ETF MINT benefits from the same
high-caliber management team and resources as its open-end sibling PIMCO
Short-Term PTSHX, as well as a similarly strong, albeit more constrained
process focused on capital preservation. Cheaper fees here boost this fund's
Morningstar Analyst Rating to Gold.
Jerome Schneider has managed this fund since its 2009 launch. The core team
supporting Schneider-five experienced specialists focused on areas that
include collateral and funding, credit, derivatives, and nondollar rates-has
remained stable under his watch. The team works closely with other sector and
country specialists who focus on shorter maturities and draw on the firm's
army of corporate credit and securitized analysts. It's an impressive roster.
The team has the expertise to employ a wider range of tactics than many of its
ultrashort-bond competitors. But while Schneider takes more risk at PIMCO
Short-Term, he follows a buttoned-up process for MINT. Unlike its sibling, this
fund doesn't use derivatives or take currency risk. It also avoids high-yield
corporate debt and typically caps exposure to emerging markets at 5%.

Morningstar Analyst Rating
Œ

Morningstar Category
Ultrashort Bond

Expense Ratio
0.35%

Category Average Expense
0.52%

5-Yr Annlzd Return
1.13%

5-Yr % Rank in Cat
18

Morningstar Pillars 12/31/2017
Process
∞ Positive

Performance
∞ Positive

People
∞ Positive

The fund has delivered strong returns versus distinct open-end and exchangetraded fund competitors, even though its tamer profile has caused it to
trail its open-end sibling. It has also kept a lid on volatility, and its relatively low
fees compared with the open-end universe are another advantage. K
Miriam Sjoblom, CFA, is director, fixed-income ratings, with Morningstar Global
Manager Research.

$10.6K
Morningstar US Short Core Bond Index

Morningstar February/March 2018

10.45
10.34
10.2
10.0
9.8

PIMCO Enhanced Short Maturity Active ETF
01/2015

01/2016

01/2017
Morningstar Ratings 12/31/2017

Mstar
Period Return

Mstar
Risk

Mstar
Rating

ETF

Cat Avg

Cash %

12.53

25.82

3-Yr

Above Avg Average

QQQQ

Bond %

82.62

74.13

5-Yr

Above Avg Average

QQQQ

Other %

4.86

0.04

10-Yr

-

-

0.4

0.6

Avg Eff Duration (yrs)

-

QQQQ

Overall Rating

Top 5 Sectors 12/31/2017

Sectors

■ ETF %

❙ Category Average %

Corporate Bond
U.S. Treasury

38.52 39.40
3.94

Other Gov't Related

13.33
11.52

Asset-Backed
3.69

Commercial MBS

14.74

6.22
2.50 2.75

0%
52

Price
∞ Positive

Growth of 10K 12/31/2017

Portfolio Stats 12/31/2017

Those constraints don't tie Schneider's hands, though. Starting with a focus
on liquidity and minimizing volatility, Schneider will take on measured
risks when their rewards appear commensurate. The fund benefited from his
decision to shorten its duration in advance of a series of target rate hikes
by the Fed beginning in December 2015, for example, and took advantage of
mispricings among short-dated corporates ahead of money market reform
implementation in October 2016. While Schneider has lightened up on
corporate credit risk somewhat more recently, he has continued to find value
in high-quality short-duration asset-backed securities (12% as of October).

Parent
∞ Positive

10

20

30

40



Table of Contents for the Digital Edition of Morningstar Magazine - February/March 2018

Contents
Morningstar Magazine - February/March 2018 - Cover1
Morningstar Magazine - February/March 2018 - Cover2
Morningstar Magazine - February/March 2018 - 1
Morningstar Magazine - February/March 2018 - 2
Morningstar Magazine - February/March 2018 - Contents
Morningstar Magazine - February/March 2018 - 4
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