On Thursday, BondBloxx partnered with Income Research + Management (IR+M) to launch the BondBloxx IR+M Tax-Aware Short Duration ETF (NYSE Arca: TAXX).
TAXX is actively managed and possesses a net expense ratio of 0.35%. Additionally, the fund utilizes a fixed income strategy that prioritizes after-tax income.
The majority of the fund’s assets will be allocated to short-duration municipal bonds. These investment-grade bonds can include a wide variety of securities, including municipal, commercial mortgage, and corporate debt, among others. The bonds are selected through a bottom-up relative value approach.
However, in sharp contrast to other fixed income funds in the field, TAXX opts for a different perspective on evaluating taxes. While many fixed-income funds often aim to minimize taxes whenever possible, the fund’s after-tax income focus gives investors different opportunities to generate revenue. In some instances, it may be more worthwhile to pay taxes to reap the rewards of after-tax income.
“Investors that invest in munis or muni ETFs are already saying that they’re concerned about their after-tax take-home. It’s not always the best way to basically optimize for that, actually. Sometimes, paying taxes in certain instances results in a higher take-home. And that’s what this product aims to do for the investors,” BondBloxx co-founder Tony Kelly told VettaFi.
Fixed Income Partners
IR+M works as the fund’s sub-adviser. In their role, IR+M scrutinizes possible investments through several lenses, including after-tax returns, credit quality, and diversification benefits, among others. According to BondBloxx, the portfolio management team that includes BondBloxx and IR+M possesses an average of 22 years of experience with fixed income.
“We’re both fixed income specialists. Our specialty though, is in managing the assets – they bring decades of experience in managing ETFs. And all of the operations and relationships with market makers and the market that ETFs are most often sold into is an amazing compliment,” Income Research + Management chief strategy officer Erinn King added.
As an actively managed fund, TAXX can capitalize on large yield gaps between municipal and corporate bonds. “Having an active manager that manages $100 billion, that’s in the market every single day looking for these opportunities — this is really quite unique and something special to put in the ETF wrapper,” said King.
BondBloxx currently has at least 24 ETFs listed in the United States. These funds represent over $2.5 billion in assets under management. BondBloxx’s largest fund, the BondBloxx Bloomberg Six Month Target Duration U.S. Treasury ETF (NYSE Arca: XHLF), possesses over $1.1 billion in AUM.
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