A new ETF is trying to capture profits in the municipal funds space.
Joanna Gallegos of BondBloxx is behind the IR+M Tax-Aware Short Duration ETF (TAXX) – launched less than a month ago.
“When you think about municipal bond portfolios, you really want people to think beyond that and look for the relative value of after-tax income,” the company’s co-founder and chief operating officer said Monday at ” ETF Edge” from CNBC.
Gallegos sees actively managed municipal bond exchange-traded funds as an income-generating opportunity in a high-rate environment. She expects healthy returns even if the Federal Reserve begins cutting interest rates this year.
According to the BondBloxx website, nearly 62% of TAXX’s holdings are municipal bonds. As of Thursday, its five largest municipal holdings by state were Illinois, Pennsylvania, New Jersey, New York and Alabama.
The ETF also includes exposure to corporate and securitized bonds. The firm says the fund’s blended bond approach presents a “broader opportunity” to increase after-tax total returns. FactSet describes the fund as “tax efficient” — balancing strong after-tax income opportunities with capital preservation through municipal and taxable short-duration fixed-income securities.
“Right now, the portfolio’s tax-equivalent yield is close to 6%. It’s about 5.88 on review,” Gallegos said. “It’s just the year to think about taxes.”
As of Friday, TAXX was down 0.2% since its March 14 launch date.
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