These funds have been steady for years, before a massive drop. It isn’t nearly as bad as one would imagine. The cash-alternative that we are going to talk about is jpst. The ETFs appear like they had some significant losses, but relatively speaking they were quite shallow. The mirage is that they have had quite flat share prices for years so dips look massive. Some of the funds highlighted are; PIMCO Enhanced Short Maturity Active ETF MINT, JPMorgan Ultra-Short Income jpst at https://www.webull.com/quote/bats-jpst, and is hares Short Maturity Bond ETF NEAR. There have been massive drops in their share price through this latest COVID-19 induced crisis.
What is a massive drop?
As the market was collapsing investors need to raise cash. These positions were likely the only things that had respectable value left. Thus, they became a source of liquidation. These drops are then compounded by the fact that everyone is rushing to liquidate their position at the same time. Therefore, leaving very little buyers to prop up the price. The creation and redemption function of ETFs appeared to have broken during this time. Typically, we see the share price and NAV’s of ETFs stay very close together. This is in contrast to CEFs when we can see wide discounts and premiums. This further helps to explain why these ETFs blew out. Cash is cash and nothing can beat that. Looking at the dividend of this fund we can see that the arch is downward.
Cash is cash – so these “cash-alternatives” can be attractive but they are certainly not risk-free. That’s to say that they aren’t cash and guaranteed. We now know how these funds will react in a crisis too. I would say they perform quite as expected and admirably. The drop was further compounded by the fact we saw discounts open up on the ETFs. This isn’t typically something we see to a significant degree in the case of ETFs. CEFs on the other hand, this is something we experience all the time. That is exactly what we try to exploit with CEFs to gain alpha.
So for short periods, these can be attractive places to put funds for those that are leery of elevated market levels. That is only for a short period though, as opportunities open up as we saw in March. We certainly could go lower from here too. The valuations in some of the CEFs are just too attractive at this time. We can hope to take advantage of some of March’s lows! You can also check alrm stock at https://www.webull.com/quote/nasdaq-alrm .