A new ETF is looking to capitalize on the municipal finance space.
Joanna Gallegos of BondBloxx is behind the IR+M Tax-Aware Short Duration ETF (TAXX). This ETF has been on sale for less than a month.
“When you think about a municipal bond portfolio, I really want people to think beyond that and look for the relative value of after-tax income,” the company’s co-founder and chief operating officer told CNBC on Monday. He spoke on “ETF Edge.”
Gallegos sees actively managed municipal bond exchange traded funds as an opportunity to generate income in a high interest rate environment. He expects to see healthy returns even if the Federal Reserve starts cutting interest rates this year.
According to the BondBloxx website, nearly 62% of TAXX’s holdings are municipal bonds. As of Thursday, the five largest municipal holdings by state were Illinois, Pennsylvania, New Jersey, New York and Alabama.
ETFs also include exposure to corporate bonds and securitized bonds. The firm said the fund’s mixed bond approach offers a “broader range of opportunities” to increase total after-tax returns. FactSet describes the fund as “tax-efficient,” balancing capital maintained through municipal and taxable short-term bonds with strong after-tax income opportunities.
“Right now, the tax-equivalent yield on the portfolio is close to 6%. If you look at it roughly, it’s around 5.88,” Gallegos said. “This is the year to really think about taxes.”
As of Friday, TAXX is down 0.2% since its launch date on March 14th.
Disclaimer
