You may be receiving emails about new muni bonds funds. Real quick, Your Survival Guy’s take is: beware of the credit quality in the states you lend money to. This is about the haves and the have-nots. Do not lose money trying to save a few dollars in taxes. Not all states are built the same. Many companies are turning their municipal mutual funds into ETFs. MarketWatch’s Christine Idzelis reports:
The number of exchange-traded funds focused on the municipal-bond market appears on the verge of expanding, providing investors more ways to find exposure to tax-exempt debt.
“The ETF business in munis is in the early innings,” said Craig Brandon, co-head of municipals at Morgan Stanley Investment Management, in a phone interview. “I think you’re going to see more and more of the muni space moving toward ETFs.”
The $4 trillion muni market attracts investors looking for tax-exempt income, particularly those who are “very wealthy,” according to Brandon. Morgan Stanley, which has two muni ETFs, including the Eaton Vance Short Duration Municipal Income ETF
EVSM and Eaton Vance Intermediate Municipal Income ETF EVIM, is planning to launch a high-yield muni ETF, he said.BlackRock announced Feb. 10 it converted its mutual fund that invests in high-yield municipal bonds into an exchange-traded fund, the iShares High Yield Muni Active ETF
HIMU. The firm said the actively managed ETF “aims to maximize federal tax-exempt current income and capital appreciation by investing in high-yield municipal securities across a variety of sectors.”Meanwhile, Nuveen said late last month that it launched two actively managed ETFs targeting municipal bonds, the Nuveen High Yield Municipal Income ETF
NHYM and the Nuveen Municipal Income ETF NUMI. And Vanguard also recently listed active ETFs targeting muni bonds. In late November, the firm announced two such funds, the Vanguard Short Duration Tax-Exempt Bond ETF VSDM and Vanguard Core Tax-Exempt Bond ETF VCRM.
Action Line: With all these new products hitting the market, you can bet the sales push will be heavy. At the same time, risks in munis could be rising. When you want to talk about bonds in your portfolio, email me at ejsmith@yoursurvivalguy.com. If you want to get started with your research into the states, begin your reading with Your Survival Guy’s 2025 Super States rankings. See where politicians put residents ahead of their own political agendas.
