VanEck Launches a 'Guided Allocation' ETF to Navigate Muni Markets

Expanding upon its line of Guided Allocation strategies, VanEck launched an actively managed fund-of-funds municipal bond exchange traded fund strategy to better help fixed-income investors navigate a changing market.

On Thursday, VanEck rolled out the active VanEck Vectors Municipal Allocation ETF (Cboe: MAAX), which has a competitive 0.36% expense ratio.

“We’re taking munis to the MAAX,” Michael Cohick, Senior ETF Product Manager at VanEck, told ETF Trends.

The active bond ETF is managed by Portfolio Manager David Schassler, Deputy Portfolio Manager Barak Laks and Deputy Portfolio Manager John Lau.

The VanEck Vectors Municipal Allocation ETF is based off a proprietary model that incorporates momentum, along with both duration and credit risk indicators, to tactically allocate among selected VanEck Vectors Municipal Bond ETFs, which covers the full range of the risk/return spectrum in the munis market and includes five VanEck Vectors Municipal Bond ETF options.

“By combining technical indicators with certain traditional fixed income risk factors, it is possible to build a clearer picture of the risk profile of the overall municipal bond market,” Ed Lopez, Head of ETF Product at VanEck, said in a note. “For investors looking for both tax-exempt income and enhanced risk-adjusted total returns, MAAX could be a compelling way to approach the municipal bond market. We’re very pleased to be launching this fund and adding to both our Guided Allocation and Municipal Bond ETF families.”

MAAX’s portfolio shows an effective duration of 7.32 years and a yield to maturity of 3.94%.

As of May 15, MAAX’s underlying portfolio includes VanEck Vectors High-Yield Municipal ETF (NYSEArca: HYD) 40.0%, VanEck Vectors AMT-Free Long Municipal Index ETF (NYSEArca: MLN) 30.0%, VanEck Vectors AMT-Free Intermediate Municipal Index ETF (NYSEArca: ITM) 20.0% and VanEck Vectors Short High-Yield Municipal Index ETF (NYSEArca: SHYD) 10.0%. Cohik explained that the MAAX strategy can be used to replace something like an aggregate municipal bond exposure due to its “smarter approach to the space with greater risk management.”

“We can go up duration or down duration, depending on markets,” Cohick said. “This is great for individual investors when they are not sure where to be on the yield curve. For advisors, you can set it and forget it for these folks.”

For more information on new fund products, visit our new ETFs category.