A new investment institution is trying to make profits in the field of municipal funds.
BondBloxx's Joanna Gallegos is behind the IR+M Tax-Aware Short Duration ETF (TAXX) – which launched less than a month ago.
“When you think about municipal bond portfolios, you really want 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 CNBC's “ETF Edge” on Monday.
Gallegos sees actively managed municipal bond exchange-traded funds as an opportunity to generate income in a rising-rate environment. It expects good returns even if the Fed starts cutting interest rates this year.
According to the BondBloxx website, approximately 62% of TAXX's holdings are in municipal bonds. Its top five holdings by state as of Thursday were Illinois, Pennsylvania, New Jersey, New York and Alabama.
The ETF also includes exposure to corporate bonds and securitized securities. The company notes that the fund's hybrid bond approach represents a “broader opportunity” to increase total after-tax returns. FactSet describes the fund as “tax efficient” — balancing strong after-tax income opportunities with capital preserved through short-term municipal and taxable fixed-income securities.
“Right now, the portfolio's tax return is close to 6%. It's about 5.88 as you look at it,” Gallegos said. “It's just a year to think about taxes.”
As of Friday, TAXX stock was down 0.2% since its March 14 launch date.
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