Goldman Sachs Adds Muni Bond Funds to ETF Lineup
The four actively managed ETFs tap into rising demand for tax-efficient, flexible fixed income funds.
Goldman Sachs Group Inc., which manages $2.93 trillion in assets, is adding four actively managed municipal bond ETFs to its lineup as it aims to tap into rising demand for active bond funds while increasing options for tax conscious investors.
The new funds, announced in a press statement, include the Goldman Sachs Ultra Short Municipal Income ETF (GUMI), Goldman Sachs Municipal Income ETF (GMUB), Goldman Sachs Dynamic California Municipal Income ETF (GCAL), and the Goldman Sachs Dynamic New York Municipal Income ETF (GMNY).
New York-based Goldman Sachs managed $35.5 billion in 39 ETFs before the debut of the latest funds.
Tapping into a Growing Muni Market
Goldman's global head of ETF distribution, Brendan McCarthy, told etf.com that the launch is part of the firm’s strategy to expand its active management expertise into the ETF market.
McCarthy emphasized the growing interest in active management for municipal bond ETF, noting that while the overall municipal bond ETF market is around $125 billion, only about $17 billion is actively managed.
“We see this as a real opportunity,” McCarthy said. He added that the new offerings allow Goldman Sachs to have more comprehensive discussions with clients about their investment options across different product types, including separately managed accounts, mutual funds and now ETFs.
Meeting Investor Needs
Demand for municipal bond ETFs is rising in part as registered investment advisors seek quick, efficient and vehicles, Scott Diamond, Goldman's co-head of municipal fixed income said in an interview.
“If they have a client, perhaps that has an allocation that needs to go towards New York municipal securities, they can have any number of options,” Diamond said. “The ask of us has been, is there a way to do it so that we can get invested as quickly as possible."
The company is also responding to demand for tax efficiency, he said, particularly for investors in high-tax states like California and New York.
“If you live in New York, you want to be as tax-efficient as possible. So presumably, that should mean New York municipal securities,” Diamond noted.
The funds also cater to investors seeking opportunistic investing in a changing municipal landscape. Diamond highlighted that even the growth in ETFs has impacted how the municipal market behaves and trades, creating opportunities for active management.
The new ETFs offer flexible strategies, with the California and New York funds able to adjust duration from two to eight years and allocate up to 30% in high-yield municipal securities, according to a press release announcing the ETFs. This flexibility allows the funds to adapt to changing market conditions and seek out the best opportunities for clients.
“A lot of our clients have come and said, well, there should be a way for active management to take advantage of that,” Diamond said, underscoring the growing recognition of the potential benefits of active management in the evolving municipal bond market.
The launch comes on the heels of Goldman Sachs' recent hiring of Bryon Lake as Chief Transformation Officer for the Client Solutions Group. Lake, formerly of JPMorgan Asset Management, is expected to play a role in optimizing the firm’s ETF offerings, though specifics of his involvement with these new products were not disclosed.
Goldman Sachs largest ETF is the Goldman Sachs ActiveBeta U.S. Large Cap Equity ETF (GSLC), with $12.5 billion in assets.