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 interest 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 fund's hybrid bond approach represents a “broader opportunity” to increase after-tax total returns, the company states. FactSet describes the fund as “tax efficient” — balancing strong after-tax income opportunities with capital preservation through both municipal and mutual funds. Short-term fixed income securities are taxable
“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.
Disclaimer
