“We like RVNU because of the holdings and expected infrastructure spending,” said Wagner. “Numbers show the U.S. will have to spend $4 trillion over the next 15 years to upgrade infrastructure. Limited supply in infrastructure means it needs to be replaced and it has to be done with new bond issues.”
RVNU’s index is intended to track federal tax-exempt municipal bonds that have been issued with the intention of funding federal, state and local infrastructure projects such as water and sewer systems, public power systems, toll roads, bridges, tunnels, and many other public use projects. The index will attempt to only hold those bonds issued by state and local municipalities where the interest and principal repayments are generated from dedicated revenue sources. [Muni Bond ETFs Sidestep Default Worries]
Nearly two-thirds of RVNU’s combined weight is allocated to transportation and water and sewer bonds. RVNU has nearly 600 holdings with modified duration to worst of 7.5 years and a yield to worst of 4.6%, according to issuer data. Over 84% of the fund’s holdings are rated AA or A.
Still, the most important advantage RVNU offers investors might just be that it steers clear of a possible pension nightmare. Recent research “into the funded status of state level defined benefit public pension plans reveals that public employee retirement promises are underfunded by $4.1 trillion. Combined, state public pension plans are just 39 percent funded,” according to State Budget Solutions.
“Our job is to perform due diligence to help clients preserve wealth and RVNU does that,” said Wagner. “One of the reasons we focused on RVNU is because it strips out general obligation bonds and avoids pension risk.”
db X-trackers Municipal Infrastructure Revenue Bond Fund
