Get Guaranteed Tax-Exempt Income Exposure with 'MMIN'

Municipal bonds like the IQ MacKay Municipal Insured ETF (MMIN) have long been praised for their tax advantages.

“Investors don’t like paying increased federal tax. But that’s where we are heading. Washington wants to boost top personal tax rates to 39.6%,” a Forbes article said. “Glom on to that state income tax from the greediest states like California, Hawaii, New York, New Jersey, Oregon and Minnesota that fall between 9.85% and 13.30% for the highest earners. What you’ve got is a rush to munis to lessen the tax burden.”

The timing couldn’t be more auspicious for investors looking to minimize their tax burden. MMIN seeks current income exempt from federal income tax.

As mentioned, it uses an active management strategy to meet its investment objective. The fund, under normal circumstances, invests at least 80% of its assets (net assets plus borrowings for investment purposes) in: (i) debt securities whose interest is, in the opinion of bond counsel for the issuer at the time of issuance, exempt from federal Income tax (“Municipal Bonds”); and (ii) debt securities covered by an insurance policy guaranteeing the payment of principal and interest.

Features of MMIN:

  1. Active Management: Actively managed approach to the uniquely fragmented and inefficient insured municipal market.
  2. Relative Value Strategy: The team relies on credit analysis, yield curve positioning, and sector rotation to uncover compelling opportunities.
  3. Tenured Team: The co-heads have worked together for over 20 years and leverage their long-term relationships with municipal dealers to help drive success.

MMIN Chart

“Insatiable” Demand for Munis

Municipal bond demand got an added boost from U.S. president Joe Biden’s massive infrastructure plan. The idea is that more money in infrastructure projects means more municipal bonds to fund the initiatives.

“Cash coming back to investors from municipal bond coupons and maturities in June, July and August will far outstrip new issues,” the Forbes article said. “The municipal bond market is more sensitive to changes in supply and demand than any other sector of the bond market. This will be the summer of municipal bond imbalances.”

“Every week there’s a relentless surge of money going into municipal bond funds of all types,” the article added. “Lipper Fund Flow says 2021 has ran the biggest influx of new money in municipal bond funds since 2000.”

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