Municipal bonds could fall back in favor of investors amid volatility not only seen in the stock market, but also in the bond market. One way to gain exposure is to actively manage 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. municipal bond funds have been negative for most of 2022, outflows have fallen significantly over the past week, according to data from Refinitiv Lipper, signaling interest in higher yields and credit strength,” a CNBC report noted.
Of course, one of the advantages of municipal bonds is their tax advantage. With higher yields and good credit quality, these local government debt options present attractive options for high net worth individuals.
“Municipal bonds generally avoid federal interest taxes and can bypass state and local levies, depending on where you live, which enhances the appeal of high earners,” the report adds.
An active ETF Muni option
With a low fee rate of 0.15%, the Avantis Core Municipal Fixed Income ETF (AVMU) uses an active management strategy so that investors or advisors can minimize the amount of research needed given the wide range of opportunities in the municipal bond market. Active management allows 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 looking for yield, the AVMU offers a 30-day SEC yield of 2.25% as of April 29. To help mitigate interest rate risk, the average curation comes in at around five years, balancing yield and interest rate risk.
Summary of AVMU highlights by its product page:
- Invests in a broad range of high quality municipal debt securities.
- Pursues the benefits associated with indexing (diversification, controlled rotation, transparency of exposures), but with the ability to add value by making investment decisions using information about current returns.
- Efficient portfolio management and trading processes designed to enhance returns while seeking to reduce unnecessary risk and transaction costs.
- Designed to integrate seamlessly with an investor’s asset allocation.
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