A new ETF is trying to capture profits in the municipal fund space.
BondBloxx's Joanna Gallegos is behind the short-duration ETF (TAXX) IR+M Tax-Aware, which launched less than a month ago.
“When you think about municipal bond portfolios, what you really want is for people to think beyond them and look at the relative value of after-tax income,” the company's co-founder and chief operating officer told the show Monday. ETF Edge” from CNBC.
Gallegos views actively managed municipal bond exchange-traded funds as an income-generating opportunity in a high-rate environment. She expects healthy returns even if the Federal Reserve begins cutting interest rates this year.
According to the BondBloxx website, nearly 62% of TAXX's holdings are in municipal bonds. Its five largest municipal holdings by state as of Thursday were Illinois, Pennsylvania, New Jersey, New York and Alabama.
The ETF also includes exposure to corporate and securitized bonds. The firm says the fund's blended bond approach presents a “broader opportunity” to increase after-tax total returns. FactSet describes the fund as “tax efficient” – balancing strong after-tax income opportunities with capital preserved through taxable municipal and short duration fixed income securities.
“Right now, the portfolio's tax equivalent yield is close to 6%. If you look at it, it's around 5.88,” Gallegos said. “It's just the year to think about taxes.”
As of Friday, TAXX is down 0.2% from its March 14 launch date.
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