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Be Cash Conscious in a Low-Rate, High-Tax World: The Appeal of Active Short-Term Bond ETFs

November 10, 2020 1:00 PM ET | 10:00 AM PT Virtual Event

CFRA and PIMCO explored how to better optimize cash allocations in a period of near-zero yields for money market funds and potentially higher tax rates ahead. Todd Rosenbluth, Head of ETF and Mutual Fund Research at CFRA, moderated a conversation with Jerome Schneider and David Hammer, heads of PIMCO’s short-term and municipal bond portfolio management. They focused on how actively managed short-term bond ETFs–—including taxable, tax-aware, and ESG solutions – may deliver attractive returns on otherwise unproductive cash allocations.  

Discussion topics included:

  • Potential strategies to optimize the cash allocation in a post-election environment
  • How to be cash-conscious and tax-aware: The role of short term municipal bonds
  • Sustaining and sustainable:  An environmentally conscious short-term strategy

Presented by:

  • Todd Rosenbluth, Head of ETF and Mutual Fund Research, CFRA
  • Jerome Schneider, Manager Director and Head of Short-Term Portfolio Management, PIMCO
  • David Hammer, Executive Vice President and Head of Municipal Bond Portfolio Management, PIMCO

Jerome Schneider

Manager Director and Head of Short-Term Portfolio Management, PIMCO

Mr. Schneider is a managing director in the Newport Beach office and head of short-term portfolio management and funding. Morningstar named him Fixed-Income Fund Manager of the Year (U.S.) for 2015. Prior to joining PIMCO in 2008, Mr. Schneider was a senior managing director with Bear Stearns. There he most recently specialized in credit and mortgage-related funding transactions and helped develop one of the first "repo" conduit financing companies. Additionally, during his tenure at Bear Stearns he held various positions on the municipal and fixed income derivatives trading desks. He has 25 years of investment experience and holds an undergraduate degree in economics and international relations from the University of Pennsylvania and an MBA from the Stern School of Business at New York University.

 

David Hammer

Executive Vice President and Head of Municipal Bond Portfolio Management, PIMCO

Mr. Hammer is an executive vice president in the Newport Beach office and head of municipal bond portfolio management, with oversight of the firm’s municipal investment grade, high yield, taxable, and separately managed accounts. He is the lead portfolio manager on PIMCO’s municipal bond fund complex, including investment grade, high yield, state-specific, closed-end funds, and interval fund. Prior to rejoining PIMCO in 2015, he was a managing director at Morgan Stanley, where he was head of municipal trading, risk management, and research. He has 18 years of investment experience and holds an undergraduate degree from Syracuse University.

Todd Rosenbluth

Head of ETF and Mutual Fund Research, CFRA

Todd Rosenbluth is Head of ETF and Mutual Fund Research at CFRA where he leads the firm’s holdings-based research efforts. Todd publishes regular thought leadership content on equity and fixed income products, supports the quantitative fund models and interacts with clients. He also serves as a member of CFRA’s Investment Policy Committee. Todd has frequently provided ETF education at Inside ETFs conferences and been quoted in media outlets, such as Barron’s, New York Times and the Wall Street Journal. Todd also held the position of Senior Director of ETF and Mutual Fund Research for S&P Global Market Intelligence.

Prior to joining CFRA, Todd previously served in other financial positions at S&P Global, such as International Mutual Fund Sector Specialist, Large Cap Value and Large Cap Growth Analyst and has served on the Fund Services Asset Allocation Committee. Prior to joining S&P Global in 2001, Todd was managing editor of Value Line Mutual Fund Survey and Senior Large Cap and Small Cap Value Mutual Fund Analyst. He was also a Financial Advisor with Morgan Stanley.

Todd holds a B.G.S in Finance from the University of Michigan and an MBA in Finance from New York University.

 

 

Some or all of the non-CFRA speakers in these materials have compensated CFRA for the production of and the right to participate in the discussions captured in these materials.  Apart from the production of these materials, CFRA may license certain intellectual property or provide services to, or otherwise have a business relationship with, certain issuers of funds or securities that are the subject of or that have participated in the production of these materials.   Irrespective of CFRA’s relationship with any participant in these materials, no part of CFRA’s compensation is tied to any particular CFRA recommendation or rating. The views expressed in these materials by non-CFRA participants do not necessarily reflect the views of CFRA.  CFRA makes no warranty or representation that these materials are accurate, timely or complete, and references to any investment, fund or security are not a recommendation to buy, sell, or hold such investment, fund or security. These materials are only for authorized recipients and may not be redistributed or reproduced without the express consent of CFRA. Additional information on the legal disclosures for these materials is available here.

 

IMPORTANT NOTICE

Please note that the following contains the opinions of the manager as of the date noted, and may not have been updated to reflect real time market developments. All opinions are subject to change without notice.

 

Past performance is not a guarantee or reliable indicator of future results.

A word about risk: Investing in the bond market is subject to certain risks including the risk that fixed income securities will decline in value because of changes in interest rates; the risk that fund shares could trade at prices other than the net asset value; and the risk that the manager's investment decisions might not produce the desired results. Investing in foreign denominated and/or domiciled securities may involve heightened risk due to currency fluctuations, and economic and political risks, which may be enhanced in emerging markets. Mortgage and asset-backed securities may be sensitive to changes in interest rates, subject to early repayment risk, and their value may fluctuate in response to the market’s perception of issuer creditworthiness; while generally supported by some form of government or private guarantee there is no assurance that private guarantors will meet their obligations. Income from municipal bonds is exempt from federal income tax and may be subject to state and local taxes and at times the alternative minimum tax; a strategy concentrating in a single or limited number of states is subject to greater risk of adverse economic conditions and regulatory changes. High-yield, lower-rated, securities involve greater risk than higher-rated securities; portfolios that invest in them may be subject to greater levels of credit and liquidity risk than portfolios that do not. Equities may decline in value due to both real and perceived general market, economic, and industry conditions. Derivatives may involve certain costs and risks such as liquidity, interest rate, market, credit, management and the risk that a position could not be closed when most advantageous. Investing in derivatives could lose more than the amount invested.  Diversification does not ensure against loss.

Exchange Traded Funds (“ETF”) are afforded certain exemptions from the Investment Company Act. The exemptions allow, among other things, for individual shares to trade on the secondary market. Individual shares cannot be directly purchased from or redeemed by the ETF. Purchases and redemptions directly with ETFs are only accomplished through creation unit aggregations or “baskets” of shares. Shares of an ETF are bought and sold at market price (not NAV). Brokerage commissions will reduce returns. Investment policies, management fees and other information can be found in the individual ETF’s prospectus.

The Morningstar Fixed Income Fund Manager of the Year award is based on the strength of the manager, performance, strategy, and firm's stewardship.

Statements concerning financial market trends or portfolio strategies are based on current market conditions, which will fluctuate. There is no guarantee that these investment strategies will work under all market conditions or are appropriate for all investors and each investor should evaluate their ability to invest for the long term, especially during periods of downturn in the market. Outlook and strategies are subject to change without notice.

PIMCO as a general matter provides services to qualified institutions, financial intermediaries and institutional investors. Individual investors should contact their own financial professional to determine the most appropriate investment options for their financial situation. This material contains the current opinions of the manager and such opinions are subject to change without notice. This material has been distributed for informational purposes only.  Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. PIMCO is a trademark of Allianz Asset Management of America L.P. in the United States and throughout the world. ©2020, PIMCO

Pacific Investment Management Company LLC, 650 Newport Center Drive, Newport Beach, CA 92660, 800-387-4626.PIMCO and CFRA are not affiliated

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