Municipal bond exchange traded funds have witnessed phenomenal growth as investors use muni debt ETFs to target a greater range of desired maturities and credit exposure.

According to a Municipal Market Advisor white paper, “Municipal Exchange Traded Funds,” muni ETF asset growth has outpaced mutual funds in the first five years of its existence. [iShares: What’s Driving Muni Bond ETFs?]

Some wealthy investors are using the low-cost ETF vehicle to generate tax-exempt income.

In the period since the ETFs were first introduced in 2007, investors have enjoyed the intraday tradability associated with the ETF, especially during bouts of extreme volatility.

More recently, muni bond ETFs have garnered greater attention in the so-called fiscal cliff as investors looked at the tax-exempt status in the face of federal tax hikes.

In addition, due to the ETF structure, investors know exactly what they own as anyone can look at up-to-date component holdings on a daily basis.

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