In response to the rising interest rate environment, J.P. Morgan Asset Management launched the first ultra-short duration municipal bond-related ETF to help investors access tax-exempt yield with less rate sensitivity.
On Thursday, J.P. Morgan Asset Management rolled out the actively managed JPMorgan Ultra-Short Municipal ETF (Cboe: JMST), which has a 0.18% expense ratio.
The new active muni bond ETF “seeks an attractive tax-free yield while focusing on active credit risk management to deliver stable returns across all market environments,” according to J.P. Morgan.
JMST’s portfolio is managed by J.P. Morgan’s Richard Taormina, Managing Director; Curtis White, Executive Director; and Josh Brunner, Executive Director.
The JPMorgan Ultra-Short Municipal ETF tries to generate a high level of current income exempt from federal income tax as is consistent with relative stability of principal, according to the fund’s prospectus.
Municipal securities in the underlying portfolio are primarily investment-grade rate and include variable rate demand obligations, variable rate demand preferred securities, short-term municipal notes, municipal bonds, tax exempt commercial paper, private activity and industrial development bonds, tax anticipation notes, bond anticipation notes, revenue anticipation notes or other short term notes, private placements and participation in pools of municipal securities.
The fund managers employ a value-driven, bottom-up approach and seeks to maintain a target duration range of two years or less. J.P. Morgan argued that the shorter duration can help to reduce volatility.
“Investors have become wary of fixed income investments in a rising rate environment,” Joanna Gallegos, U.S. Head of ETFs at J.P. Morgan Asset Management, said in a note. “JMST’s focus on low duration positions should help to mitigate interest rate risk, while potentially offering a higher yield than tax-exempt money market funds.”
For more information on new fund products, visit our new ETFs category.