BlackRock Converts High-Yield Muni Fund to ETF
The $1.5 billion High Yield Municipal Fund is now an ETF as the asset-management firm responds to investor demand for more tax-efficient, flexible fixed-income options.
BlackRock Inc. (BLK) announced Monday it is turning its High Yield Municipal Fund into an exchange-traded fund, the latest sign that major asset managers are embracing ETFs to give investors a more tax-friendly and flexible way to tap into the muni bond market.
The transition of the $1.5 billion fund into the iShares High Yield Muni Active ETF (HIMU) comes as BlackRock projects global active ETF assets will surge to $4 trillion by 2030 from $900 billion in June 2024, the company said in a statement announcing the conversion.
The shift underscores how ETFs are becoming a preferred structure for investors looking for greater trading flexibility and potential tax advantages compared to traditional mutual funds. By moving the fund into an ETF, BlackRock, the world's largest asset manager with more than $11 trillion in AUM, is giving investors a way to access high-yield municipal bonds while benefiting from lower costs and real-time market pricing.
Investors have been looking increasingly at fixed-income products amid concerns about macroeconomic uncertainties, including the Trump administration's plans to impose tariffs against long-time trading partners, stubborn inflation and global conflicts in the Middle East and Ukraine.
"Today's higher interest rate environment provides a generational opportunity to capture income, particularly in the municipal bond market," Pat Haskell, head of BlackRock's Municipal Bond Group, said in the statement. "Through the ETF wrapper, HIMU aims to take advantage of the attractive yield levels and strong credit quality in municipal bonds.
BlackRock Reshapes Municipal Bond Investing
The fund will continue to invest in high-yield municipal securities across a range of sectors, with BlackRock’s Municipal Bond Group managing the portfolio. The firm oversees more than $182 billion in municipal bond assets, according to the release. The fund will be managed by portfolio managers Pat Haskell, Kevin Maloney, Ryan McDonald, Phillip Soccio and Walter O’Connor.
HIMU has delivered top-quartile performance over multiple time periods, including the one-, five-, 10- and 15-year timeframes through Dec. 31, 2024, according to BlackRock's release.
It will maintain at least 65 percent of its assets in high-yield and BBB rated bonds, according to the fund's product page.
BlackRock manages 438 ETFs traded on the U.S. markets, with total assets under management of over $3 billion, according to etf.com data. Its largest fund is the $602.8 iShares Core S&P 500 ETF (IVV).
