ETF Watch: Van Eck Adding To Muni ETF Lineup

September 19, 2016

Van Eck is rolling out Tuesday two new municipal bond ETFs targeting what the company calls the "sweet spot of the muni yield curve.”

The VanEck Vectors AMT-Free 6-8 Year Municipal Index ETF (ITMS) and the VanEck Vectors AMT-Free 12-17 Year Municipal Index ETF (ITML) essentially parse the comprehensive exposure to the intermediate muni space the VanEck Vectors AMT-Free Intermediate Municipal Index ETF (ITM) currently offers.

ITM, which has $1.6 billion in assets under management, tracks a market-weighted index of tax-exempt municipal bonds with nominal maturities of six to 17 years.

According to Van Eck, the launches are designed to give investors “greater ability to manage duration” at time when the market is bracing for an interest rate hike.

Longer-Dated Bonds More Rate Sensitive

Currently, there’s an estimated 50/50 chance the Federal Reserve will tinker with rates by year-end, and the longer-dated a bond is, the more sensitive it is to changes in interest rates.

Muni bond ETFs are generally considered a safe-haven type of investment, and one that generates income with tax benefits. So far this year, ITM has attracted more than $252 million in fresh net assets, and the biggest muni fund in the market, the iShares National Muni Bond ETF (MUB), has seen $1.6 billion in net inflows year-to-date.

The new offerings join a number of iShares iBonds muni ETFs that also target specific spots in the yield curve.

Both Van Eck funds, which each come with an 0.24% expense ratio—or $24 per $10,000 invested—will be listed on the Bats exchange, which owns ETF.com.

Contact Cinthia Murphy at [email protected]

 

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