Market Overview

There Are A Lot Of Muni Bonds In This New ETF

There Are A Lot Of Muni Bonds In This New ETF

Some municipal bond exchange traded funds hold a lot of those bonds, but many of those funds focus on certain types of municipal debt or specific durations and maturities.

A new ETF offers investors a unique approach to increasing the depth and diversity of their municipal bond exposure.

What Happened

On Thursday, VanEck introduced the VanEck Vectors Municipal Allocation ETF (CBOE: MAAX). That new ETF is the seventh municipal bond ETF in the VanEck stable.

MAAX “seeks maximum long-term after-tax return consisting of capital appreciation and income generally exempt from federal income tax. In pursuing long-term total return, the Fund seek to reduce duration and/or credit risk during appropriate times by allocating primarily to VanEck Vectors municipal exchange-traded products that invest in tax-exempt bonds,” according to VanEck.

Translation: the new MAAX is an ETF of ETFs and its holdings are other VanEck municipal bond funds.

Why It's Important

MAAX debuted with four holdings, meaning two of the firm's established municipal bond ETFs were not included in MAAX's initial lineup.

The new ETF's four holdings are the VanEck Vectors High-Yield Municipal Index ETF (CBOE: HYD), VanEck Vectors  AMT-Free Long Municipal Index ETF (CBOE: MLN), VanEck Vectors AMT-Free Intermediate Municipal Index ETF (CBOE: ITM) and the VanEck Vectors Short High-Yield Municipal Index ETF (CBOE: SHYD).

Combined, those four ETFs are home to 5,860 bonds, giving MAAX when the deepest, most diverse rosters among all municipal bond ETFs. Those four funds have over $4.7 billion in combined assets under management.

MAAX has an effective duration of 7.32 years and an average years to maturity of 18.41, according to issuer data.

What's Next

“MAAX is designed around a proprietary model that uses momentum, along with both duration and credit risk indicators, to tactically allocate among selected VanEck Vectors Municipal Bond ETFs,” according to the issuer.

The new MAAX carries an annual fee of 0.36 percent, or $36 on a $10,000 investment.

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