Van Eck Files To Introduce Muni Bond CEF ETF

Van Eck, parent company of Market Vectors and the sixth-largest U.S. ETF issuer, has filed plans with the SEC to introduce a municipal bond closed-end fund ETF. If the ETF comes to market, it would be the 35th under the Market Vectors label and the firm's ninth bond fund. The filing did not disclose a ticker and expense ratio for the proposed ETF. The fund will track the Market Vectors Municipal Bond Closed-End Fund Index, a benchmark comprised of various closed-end funds that invest in muni bonds. The new ETF will use a sampling strategy, which has led to tracking errors in the past with other muni bond ETFs. Another interesting issue with the new fund could arise. As ETFdb.com notes: “Since the fund intends to invest in closed-end funds, which by definition only dole out a certain number of shares, this proposed ETF could reach a point where it is unable to purchase the required amount of underlying securities thereby turning into a closed-end fund as well.” Van Eck is one of the top issuers of muni bond ETFs with five funds offering investors exposure to the asset class. The Market Vectors High-Yield Municipal Index ETF HYD has almost $225 million in assets under management. Van Eck's other four muni bond ETFs track investment grade issues and have about $475 million in assets under management combined. Earlier this month, Van Eck introduced the Market Vectors LatAm Aggregate Bond ETF BONO, an ETF that tracks an index comprised of government and corporate debt denominated in U.S. dollars, euro and local currencies from Latin American issuers. Van Eck had about $23 billion in ETF assets under management at the end of April.