Investors haven’t flocked to the latest branch of exchange traded funds (ETFs), the municipal bonds. Although the individual investor is the target, interest hasn’t grown quite yet. Heavyweights such as Barclays, State Street Global and PowerShares have entered into the municipal market, and Van Eck Global launched an intermediate-term muni-ETF last week, reports Michael A. Pollock for The Wall Street Journal.
The smaller fragmented muni-market has thousands of smaller bond issues that trade less frequently than the regular ETF shares. Muni-ETFs so far have had limited appeal to individual investors who comprise the bulk of the tax-exempt bond market. These types of investors tend to buy and hold the bonds until maturity to benefit from the daily compounding, whereas frequent ETF trades could eat into the returns with brokerage fees.
ETF providers believe that after some time investors will see the benefits of having a muni-ETF and will hop on the bus.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.