At the 2020 Inside ETFs conference, Jason Bloom, Director of Global Macro ETF Strategy at Invesco, caught up with ETF Trends to discuss its BulletShares ETF Suite.
Bloom said the most exciting element currently regarding Invesco’s BulletShares ETF suite is the new suite of municipal bond ETFs that Invesco launched in September 2019. With a debate amongst forecasters as to whether economic conditions are getting better or worse, a portfolio of BulletShares muni asset class ETFs could provide investors non-taxable equivalent yields.
Even if those invested get out to the seven-year maturities, the muni taxable equivalent yields are higher than the corporates, but investors get a fraction of the credit risk.
“For someone who has a taxable account,” Bloom explains, “To be able to get that huge step up in quality, without sacrificing any yield, is pretty phenomenal value at the moment, given the uncertainty about the trajectory of the economy.”
Bloom noted that Invesco currently has 10 muni BulletShares ETFs available, with maturities ranging from as early as 2021 up to 2029.
He sees BulletShares as having two primary roles in a portfolio. First BulletShares ETFs are an easy transition for advisors who typically buy individual bonds and holds them to maturity, and enjoys that level of visibility from a transparent ETF. Many clients like immunization from interest rate risk that’s provided by a bond ladder, with respect to each bond’s lifespan.
There is diversity of opinion about the direction of interest rates, and BulletShares allow investors to easily build a bond ladder of short, medium, and long duration maturities. A bond ladder can help investors to either secure higher rates for the future or lock in higher yield.
BulletShares could also be an option for clients who like active management and believe alpha can be added to their fixed income portfolios. Layering in BulletShares can work on a tactical fashion to manage client needs, as part of a core portfolio or as a means of tweaking exposure, without the need to trade individual municipal bonds.
On the taxable muni side, Invesco offers the BAB (Build America Bond) ETF, which tracks a broad taxable muni portfolio.
Bloom pointed out, that fund sat dormant for several years, with many believing that asset class could die off at some point. However, with the 2017 changes to the tax code, things have moved in a different direction and the asset class has gained relevancy and grown.
“Taxable munis are really interesting because they appeal to a very broad investor audience,” Bloom said. “Corporations, pensions, overseas investors can all find value in taxable muni side that they can’t find on the non-taxable side.”
To learn more about the BulletShares ETF suite, click here: https://www.invesco.com/us-etf/en/fixed-income.html.