First Minnesota Muni ETF Debuts

March 12, 2021

Today, Minnesota-based advisory firm Mairs & Power launched the first ETF to target that state. The  Mairs & Power Minnesota Municipal Bond ETF (MINN) is actively managed and invests solely in municipal debt that is exempt from both federal and Minnesota state taxes.

The fund comes with an expense ratio of 0.39% and lists on Cboe Global Markets.

Brent Miller, MINN’s lead portfolio manager, says that the selection of municipal bond funds targeting Minnesota tends to be expensive, and buying individual muni bonds comes with liquidity problems. He believes the fund fills a market need.

“We have been a Minnesota-focused firm for a long time, “ Miller said, noting his company’s in-house equity funds tend to have a Minnesota tilt. “To make the leap over to Minnesota municipal bonds flows perfectly with what we do already.”

MINN is mainly an investment-grade fund, but it can invest up to 25% of its assets in junk bonds that are not in default or close to default. It also relies mainly on fundamental analysis to select the portfolio, according to the prospectus.

The state’s municipal bond market is rather large and unique. Miller notes that Minnesota’s taxes are fairly high and that there are already over a dozen municipal bond mutual funds focused on the state. The ETF wrapper is simply a new and more democratized way to gain exposure to the space, he says.

“In Minnesota, over three-quarters of the market is rated AA or higher,” he explained. “You want to find value where you can, but you have to recognize that there’s probably less that you can add from a credit perspective in that category.”

“For the names below AA, that’s where we want to be fairly selective in what we are adding for credit reasons,” Miller added.

The fund is not only the first Minnesota muni bond ETF but the first ETF from Mairs & Power.

Contact Heather Bell at [email protected]

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