Cinthia Murphy

Cinthia Murphy is managing editor of ETF.com, specializing in all things ETFs. Her experience includes time at Dow Jones and former BridgeNews, covering commodity futures markets in Chicago and Brazil equities in Sao Paulo. Murphy has a bachelor’s degree in journalism from the University of Missouri-Columbia.

Features and News

BNP Paribas VIX ETF To Target Contango

BNP Paribas jumps into VIX-related ETFs with contango in its cross hairs.

 

Features and News

Study: Marketing Key To ETF Market Growth

ETFs have many fans, but the future of the industry depends on sound marketing.

Features and News

First Trust Plans Inflation-Fighting ETFs

First Trust decides it too wants a piece of the inflation-fighting ETF market.

Features and News

ProShares Rolls Out Hedge Fund ETF

ProShares offers a competitively priced hedge fund replication ETF.

Features and News

Barclays: US Equities Still Look Good

Barclays, in its quarterly update, sees value in U.S. stocks, and warns of emerging market inflation.

Features and News

Van Eck Launches Muni CEF ETF

Van Eck, the New York-based firm known for its natural resources investment strategies, today launched a fund-of-funds ETF of closed-end funds focused on municipal debt that’s designed to provide investors with tax-exempt income.

The Market Vectors CEF Municipal Income ETF (NYSEArca: XMPT) has an annual net expense ratio of 1.43 percent, and would go head to head with the PowerShares CEF Income Composite Portfolio (NYSEArca: PCEF). The PoweShare fund has gathered $243 million since its February 2010 inception. It costs 1.62 percent.

XMPT is designed to generate tax-exempt income by putting into a single wrapper all the benefits of closed-end funds, including active management; use of leverage to enhance yield and income potential; and exposure diversification, Van Eck officials said in a conference call.

“XMPT is a proxy for the muni market,” Paul Mazzilli, a senior advisor for S-Network Global Indexes, said of Van Eck’s new fund. As such, it can be used as a hedging tool, to short or to go long the market or for tax trades, Mazzilli said. S-Network is the index provider for the new ETF.

On the flip side, Van Eck said in recent paperwork it filed with regulators while XMPT was still in registration that the Investment Company Act of 1940 limits the weightings of each individual closed-end fund in the ETF to 3 percent, which could contribute to ETF’s tracking error.

Indeed, an ETF focused on closed-end funds is likely to have its share of problems, as IndexUniverse Director of Research Dave Nadig wrote in a blog titled “PCEF: Powdering The Pig” after the rollout of PCEF in early 2010.

Closed-end funds trade at premiums or discounts to their NAVs, and there’s no reason they wouldn’t in an ETF wrapper. Moreover, because XMPT will include leverage from its underlying closed-end funds, its risk profile is likely to rise.

Muni Market Recovery

The deep discounting in the muni bond market in the past year -- created by widespread concerns of defaults as cities and states struggle with flagging tax revenues in a sluggish economy -- seems to be gone for now. In its place is a solid recovery, as investors seek yield in a market characterized by low issuance.

What’s more, analysts see the market as favorable in the months ahead, according to Jim Colby, Van Eck’s senior municipal strategist.

“The muni market has put in a solid six months and recovered virtually all lost performance of last year,” Colby said in the call. “It has continued to show resilience, stability and performance relative to other asset classes. The muni market is an attractive value alternative despite the low interest rate environment.”

The Details

XMPT, which will track the S-Network Municipal Bond Closed-End Fund Index, consisting of 88 U.S.-listed municipal closed-end funds, should see tax-exempt yields exceeding 6 percent annually, according to company data.

The fund, which will track its benchmark through full replication, ranks its components by net asset value, overweighting funds trading at a discount and underweighting those at a premium.

The strategy strives to generate the most possible tax-exempt income while providing investors with highly diversified exposure to the muni market.

Investing in single closed-end fund often requires a lot of homework by the investor, something that a diversified, one-stop-shop ETF structure can simplify, Mazzilli said.

“The index is designed to take advantage of the pricing inefficiencies in the muni market,” Mazzilli said. “It’s a great time to launch this product because of the value in the muni market.”

The steepness of the muni yield curve is bordering on historical levels at 300-350 basis points, Colby added. XMPT, designed to have a tilt towards yield, should deliver high yield and high untaxed income at a time when investor dollars are searching for yield opportunities, he said.

XMPT is Van Eck’s first muni-linked ETF that offers an active management component. The company has now six muni-oriented ETFs that together have more than $ 700 million in assets, the company said.

Van Eck has more than $23 billion in total ETF assets.

Features and News

PowerShares Eyes Chinese-Bond ETF

PowerShares becomes the second firm in a week to unveil plans for a Chinese bond ETF.