Virtus has partnered up with Cumberland Advisors to launch an actively managed municipal bond exchange traded fund that draws upon the management team’s expertise.
On Wednesday, Virtus and Cumberland Advisors rolled out the Virtus Cumberland Municipal Bond ETF (NYSEArca: CUMB). CUMB has a 0.59% net expense ratio.
The new fund will be managed by David R. Kotok, Cofounder and Chief Investment officer of Cumberland Advisors, and John R. Mousseau, Executive Vice President and Director of Fixed Income at Cumberland Advisors. Cumberland Advisors was founded in 1973 and caters towards investors looking for a wealth preservation bias and conservative investment orientation to manage both risks as as well as returns.
“The Fund offers investors the opportunity to access Cumberland Advisors’ portfolio strategy and its top-down economic approach to municipal bond management,” according to Cumberland.
CUMB will try to provide a competitive level of current income exempt form federal income tax while preserving capital by investing in municipal bonds, according to the prospectus sheet.
“Cumberland Advisors Inc., the Fund’s sub-adviser, will invest the Fund’s assets using a barbell strategy, which means that the Sub-Adviser will overweight the Fund’s investments in Municipal Bonds with maturities on the short and long ends of the fixed income yield curve, while underweighting exposure to Municipal Bonds with intermediate maturities,” according to the prospectus.
The barbell structure will help CUMB benefit from steepness of the muni yield curve and allow it to capitalize on moves in the muni yield curve and municipal “centric” events like pre-refunding of muni bonds and upgrades to credit.
The fund does not come with a target duration, so the managers may shift from shorter to longer duration based on their interest-rate forecasts and view on the fixed-income outlook.
“The Fund will evolve over the interest rate cycle with changes in durations and maturities depending upon economic outlook, inflation, Federal Reserve decision making, and the shape of the yield curve. Cumberland’s philosophy centers on the fact that markets often become significantly overvalued or undervalued, but will revert to mean valuations over time,” according to Cumberland.
The active ETF may hold general obligation bonds, revenue bonds, discount bonds, premium bonds, zero coupon bonds and private activity bonds. Debt will generally be rated “A” or above.
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