That is to say nothing of California, where CalPERS, the largest U.S., public pension system is to blame for the Golden State’s spate of municipal bankruptcies. CalPERS confirms that “the average CalPERS pension is a modest $2,784 per month.”

That means the average CalPERS pensioner collects $33,408 per year, but that is up from $20,532 per year in 1999. As the recent municipal bankruptcy proceedings in California show, CalPERS gets paid and bondholders get the shaft, a scenario that lends risk to investors and ETFs with big California muni exposure. HYD has a 9.3% weight to California munis.

Investors looking to mitigate duration risk while maintaining a high-quality credit profile can consider ETFs such as the Market Vectors-Short Municipal ETF (NYSEArca: SMB).

Rated marketweight by S&P Capital IQ, SMB has 30-day SEC yield of 1.01% and a modified duration of 3.01 years. Investors have added $3.5 million to the $275 million fund this year. California, New Jersey and Illinois bonds combine for 27.9% of SMB’s weight.

Market Vectors-Short Municipal ETF