VanEck has launched a new, actively managed ‘fund of funds’ ETF targeting the municipal bond market.

Ed Lopez, Head of ETF Product with VanEck.

The VanEck Vectors Municipal Allocation ETF (MAAX US) invests in municipal bond ETFs with asset allocation guided by a proprietary model.

It has been listed on Cboe BZX.

Municipal bonds (or “munis” for short) are debt securities issued by US states, cities, counties and other governmental entities to fund day-to-day obligations and to finance capital projects such as building schools, highways or sewer systems.

Generally, the interest on municipal bonds is exempt from federal income tax.

The new fund will invest primarily in VanEck’s own suite of municipal bond ETFs, although the prospectus notes that it may also hold unaffiliated ETFs as well as closed-end funds.

VanEck’s muni suite covers the full range of the risk/return spectrum, including high-yield and short-term high-yield, and short-, medium- and long-term investment-grade ETFs. These funds have combined assets under management of $5bn.

MAAX will allocate to these ETFs according to technical and macroeconomic indicators designed to identify profitable credit and duration risk opportunities. Such indicators include market prices and trends, volatility, yield spreads, relative yield ratios, interest rates, and cross-asset correlations.

Ed Lopez, Head of ETF Product at VanEck, commented, “By combining technical indicators with certain traditional fixed income risk factors, it is possible to build a clearer picture of the risk profile of the overall municipal bond market.

“For investors looking for both tax-exempt income and enhanced risk-adjusted total returns, MAAX could be a compelling way to approach the municipal bond market. We’re very pleased to be launching this fund and adding to both our Guided Allocation and Municipal Bond ETF families.”

The fund’s allocation at launch is approximately split 50/50 between high-yield and investment-grade bonds and with representation across the yield curve. The VanEck High-Yield Muni Index ETF (HYD US) currently commands the largest weight, with 40%, followed by the VanEck AMT-Free Long Muni Index ETF (MLN US) at 30%, the VanEck AMT-Free Interm Muni Index ETF (ITM US) at 20%, and the VanEck Short High-Yield Muni Index ETF (SHYD US) at 10%.

The fund comes with an expense ratio of 0.36% which includes the cost of holding the underlying ETFs.