BIL, SHV: Guaranteed Zero Returns

August 22, 2011

 

Another option is the Pimco Enhanced Short Maturity Strategy Fund (NYSEArca: MINT). For investors disillusioned with Treasurys and looking for alternative ultra-short-term investment, MINT may well serve a purpose. Here at IndexUniverse, MINT has its supporters and detractors, but it should at least be considered in this conversation.

MINT comes with its own issues that must be considered. The fund is actively managed to outperform money market funds. The fund managers select investment-grade securities, both domestic and foreign, of varying maturities. The fund, however, maintains a low duration, keeping its interest rate risk low. It charges a higher expense ratio than BIL or SHV, at 35 basis points.

Nevertheless, it remains the only other investment-grade option within all ETFs with low duration. Considering the similar durations of SHV and MINT, MINT’s yield is substantially higher. Furthermore, since its inception, MINT has dramatically outperformed SHV, while remaining uncorrelated with other major asset classes.

Ticker Fund Name AUM($, MM) 30 Day SEC Yield Duration Expense Ratio
BIL SPDRS Barclays Capital 1-3 Month T-Bill ETF 2,026.6 0.08% 0.12 0.13%
SHV iShares Barclays Short Treasury Bond Fund 4,310.6 0.00% 0.40 0.15%
SHY iShares Barclays Short 1-3 Year Treasury Bond Fund 9,009.0 0.16% 1.80 0.15%
STIP iShares Barclays Short 0-5 Year TIPS Bond Fund 193.2 1.39% 1.30 0.20%
STPZ PIMCO 1-5 Year U.S. TIPS Index Fund 1,217.6 1.53% 2.50 0.20%
MINT PIMCO Enhanced Short Maturity Strategy Fund 1,350.8 0.81% 0.63 0.35%

Sources: Issuers

MNT SHV
PIMCO Enhanced Short Maturity Strategy (MINT) 1 0.091
iShares Barclays Short Treasury Bond (SHV) 0.091 1
iShares Barclays Aggregate Bond (AGG) 0.526 0.2
SPDR S&P 500 (SPY) -0.15 0.026
iShares MSCI ACWI (ACWI) -0.091 0.029
SPDR Barclays Capital International Treasury Bond (BWX) 0.101 0.038
(Daily Correlation: 11/19/2009 to 8/18/2011)

 

Given the current interest rate and market environment, investors must consider all their options for safe-keeping their money. BIL and SHV may be the safest of the safe, but there are interesting options just a smidge further out the curve.

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