Fund managers are beginning to offer a wide variety of municipal bond exchange-traded funds, but most small investors have yet to take advantage of these new products, primarily because they tend to hold muni bonds throughout their duration.
Van Eck Global last week launched an intermediate-term municipal bond ETF, designed to offer investors tax-exempt income through exposure to investment-grade municipal bonds with a nominal maturity of six to 17 years, and the New York money manager plans to launch similar products soon.
“Municipal bond ETFs offer investors a better way to purchase municipal securities – I like to think of it as ‘more munis for the money,’” said Jan van Eck, a principal at Van Eck Global. “There are compelling cost savings to consider when compared to individual bond purchases and traditional mutual fund platforms.”
Muni ETFs are likely to have more appeal to professional fund managers, insurance companies and hedge funds that play the market frequently.
The Van Eck fund charges management fees of 0.2 percentage points, well below that of many open-end and close-end bond funds. The muni ETFs have the ability to lock into a sizable transaction at a moment’s notice. Harvey Hirsch, a senior vice president at the firm, said Van Eck wants to become a one-stop shop for muni ETF investors.