Strong Active Muni Funds Available in an ETF Wrapper – ETF Trends




By Todd Rosenbluth, CFRA

  • Actively managed municipal bond ETFs gathered $1.1 billion of new money year-to-date through July 24, equal to 18% share of the tax-free ETF category. This is much larger than its 7% share of the asset base.
  • First Trust Managed Municipal ETF (FMB) is the largest and most popular of these ETFs, but PIMCO Intermediate Municipal Bond ETF (MUNI) and IQ Mackay Shields Municipal Insured ETF (MMIN) have grown in 2020 from increased interest.
  • Some of the more popular active municipal bond ETFs are available for less than half the expense ratio as similar mutual fund alternatives, creating an opportunity as investors further appreciate the benefits of ETFs.

Positive Negative Implications

Actively managed municipal bond ETFs have been gaining market share in 2020. Just 7% of the municipal bond ETF asset base is actively managed, with index-based funds dominating, according to CFRA’s First Bridge ETF database. iShares National Muni ETF (MUB) and Vanguard Tax-Exempt ETF (VTEB), which track the same S&P Dow Jones benchmark, have $18 billion and $8.4 billion in assets, respectively. Meanwhile, the $4.1 billion SPDR Nuveen Barclays Short Term Municipal Bond ETF (SHM) and the $3.4 billion iShares Short-Term National Muni Bond ETF (SUB) are popular less interest-rate sensitive alternatives. However, as the municipal bond market has become more volatile in 2020, investors are starting to gain comfort in actively managed
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