ETF-Of-ETFs Targets Muni Space

New VanEck fund mainly invests in ETFs from the same issuer.

Reviewed by: Heather Bell
Edited by: Heather Bell

Today VanEck launched an ETF-of-ETFs that targets the municipal bond space and mainly holds ETFs that are also issued by VanEck. The VanEck Vectors Municipal Allocation ETF (MAAX) is actively managed based on a quantitative model that uses momentum along with macroeconomic indicators to manage duration and credit risk.

MAAX comes with an expense ratio of 0.36%—which includes a 0.08% management fee—and lists on Cboe Global Markets, parent company of

“By combining technical indicators with certain traditional fixed income risk factors, it is possible to build a clearer picture of the risk profile of the overall municipal bond market,” VanEck’s Head of ETF Product Ed Lopez said in a press release.

“For investors looking for both tax-exempt income and enhanced risk-adjusted total returns, MAAX could be a compelling way to approach the municipal bond market,” he added.

Fund Details

MAAX will generally invest in five of VanEck’s other muni ETFs, but the prospectus notes the fund can also invest in ETFs and closed-end funds from other issuers.

The fund aims to maximize its long-term after-tax return, and sets about doing so using its municipal allocation model, which includes a trend-following element and that is designed to identify periods of heightened of credit and duration mix.

The model is updated monthly and relies on inputs based on technical and macroeconomic indicators such as market prices and trends, volatility, yield spreads and relative yield ratios, according to the fund documents.

According to Michael Cohick, senior ETF product manager at VanEck, MAAX is a new approach to accessing the muni space, and the days of a stable, low volatility environment in municipal bonds have passed.

“We think, in the future, volatility could pick up again, so you might want to get more tactical with muni exposure. Some analysts say we could be looking at something like the 1980s, where there was a lot of volatility in this market,” Cohick said. “We feel like a tactical approach that appropriately risks you on and risks you off as credit and duration indicators suggest makes a lot of sense.”

The Model

The quantitative model underlying MAAX’s management focuses on duration—or interest rate—risk and credit risk. It takes a “risk on” approach when duration risk is high and a “risk off” approach when duration risk is low. MAAX’s allocations will shift among the VanEck muni ETFs based on different scenarios.

In times of high credit and duration risk, the fund will generally have the VanEck Vectors High-Yield Municipal Index ETF (HYD) as its largest holding, at 40% of the portfolio, but in times of low credit risk and high duration risk, the fund’s largest allocation will be to the VanEck Vectors AMT-Free Long Municipal Index ETF (MLN), at 50% of the portfolio.

When credit risk is high but duration risk is low, the fund’s largest allocation will be to the VanEck Vectors AMT-Free Short Municipal Index ETF (SMB) at 70%, and when both credit and duration risk are high, MAAX will fully allocate 100% of its portfolio to SMB, based on a presentation provided by VanEck.

Contact Heather Bell at [email protected]

Heather Bell is a former managing editor of She has also held editorial positions at Dow Jones Indexes and Lehman Brothers. Bell is a graduate of Dartmouth college and resides in the Denver area with her two dogs.