A new ETF is trying to cash in on the muni fund space.
BondBloxx’s Joanna Gallegos is the force 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 be able to look beyond them and look for 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 income-generating opportunity in a high-rate environment. Even if the Fed starts cutting interest rates this year, she expects healthy returns.
Nearly 62% of TAXX’s holdings are municipal bonds, according to the BondBloxx website. As of Thursday, its five largest municipal bond holdings by state were Illinois, Pennsylvania, New Jersey, New York and Alabama.
The ETF also includes investments in corporate bonds and securitized bonds. The fund’s hybrid bond approach offers “broader opportunities” to increase after-tax total returns, the firm said. FactSet describes the fund as “tax efficient” – balancing strong after-tax income opportunities with capital preservation through municipal and taxable short-term fixed income securities.
“Right now, the tax-equivalent yield on the portfolio is close to 6%. If you look at it, it’s about 5.88,” Gallegos said. “This is the year to think about taxes.”
As of Friday, TAXX had fallen 0.2% since its launch on March 14.
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