Municipal bonds could be falling back into favor for investors amid the volatility not only seen in the stock market, but also the bond market. One way to get exposure is via actively managed exchange traded funds (ETFs).
Speaking of which, muni bond ETFs are starting to see more inflows in recent weeks.
“While weekly inflows for U.S. muni bond funds have been negative for most of 2022, outflows dropped significantly last week, according to Refinitiv Lipper data, signaling interest in higher yields and credit strength,” a CNBC report noted.
Of course, one of the advantages of muni bonds is their tax benefits. With higher yields and good credit quality, these local government debt options present attractive options to high net worth individuals.
“Muni bonds generally avoid federal taxes on interest and may bypass state and local levies, depending on where you live, boosting the appeal among higher earners,” the report added.
An Active Muni ETF Option
With a low expense ratio of 0.15%, the Avantis Core Municipal Fixed Income ETF (AVMU ) utilizes an active management strategy so investors or advisors can minimize the amount of research necessary given the vast array of opportunities in the municipal bond market. Active management allows the portfolio managers to add or subtract holdings based on the current market environment, allowing for on-the-fly adjustments when deemed necessary.
For fixed income investors seeking yield, AVMU comes with a 30-day SEC yield of 2.25% as of April 29. To help mitigate rate risk, average curation comes in at around five years, striking the balance between yield and rate risk.
Highlight summary of AVMU per its product page:
- Invests in a broad set of investment-grade municipal debt obligations.
- Pursues the benefits associated with indexing (diversification, controlled turnover, transparency of exposures), but with the ability to add value by making investment decisions using information in current yields.
- Efficient portfolio management and trading process that is designed to enhance returns while seeking to reduce unnecessary risks and transaction costs.
- Built to fit seamlessly into an investor’s asset allocation.
For more news, information, and strategy, visit the Core Strategies Channel.