The Market Vectors High-Yield Municipal Index ETF (HYD) has surpassed $1 billion in assets under management (AUM). The fund becomes the first high-yield municipal bond ETF, and one of five municipal bond ETFs overall, to pass this threshold.

James Colby, Portfolio Manager and Senior Municipal Strategist with Market Vectors ETFs.

This milestone puts the entire Market Vectors suite of six municipal income ETFs, which covers the full risk/return spectrum, over $2 billion in AUM.

James Colby, Portfolio Manager and Senior Municipal Strategist with Market Vectors ETFs, said: “High yield is far more than a niche in the municipal bond market as it enables traditional as well as certain for-profit issuers to access capital at a lower cost than they otherwise could in the taxable market.”

He added: “More significantly, it is an attractive source of tax-free yield for investors who seek to augment their income stream in a yield constrained market. With credit impairments on the decline, and the low-cost feature of ETFs, a diversified municipal portfolio such as HYD may be compelling to a variety of investors.”

The fund launched on the NYSE Arca in February of 2009 and was the first ETF to provide investors with access to high-yield municipal bonds. It currently has a 4-star rating (out of 5) from Morningstar in both the overall and three-year time periods. This rating is an indication of a fund’s risk-adjusted returns. The only other high-yield municipal bond ETF is the SPDR Nuveen S&P High Yield Municipal Bond ETF (HYMB) offered by SSgA SPDR. This fund has assets of $194 million.

HYD’s underlying benchmark is the Barclays Municipal Custom High Yield Composite Index. This index tracks the high-yield municipal bond market with a 75% weight in non-investment grade municipal bonds and a 25% weight in Baa/BBB-rated investment grade municipal bonds for liquidity.

The other funds in Market Vectors’ municipal income suite include the Market Vectors CEF Municipal Income ETF (XMPT), the Market Vectors Intermediate Municipal Index ETF (ITM), the Market Vectors Long Municipal Index ETF (MLN), the Market Vectors Pre-Refunded Municipal Index ETF (PRB), and Market Vectors Short Municipal Index ETF (SMB), all of which are listed on the NYSE Arca.

The world’s largest municipal bond ETF is the iShares National AMT-Free Muni Bond ETF (MUB) with $3.5 billion in assets. This is followed by the SPDR Nuveen Barclays Short Term Municipal Bond ETF (SHM) with $1.6 billion, and the SPDR Nuveen Barclays Municipal Bond ETF (TFI) with just under $1.3 billion. Aside from the Market Vectors fund, which has assets of  $1.1 billion, the only other $1 billion-plus municipal bond ETF is the PowerShares Insured National Municipal Bond Portfolio ETF (PZA) with $1.0 billion.