The landscape of municipal bond portfolios is evolving, with a new player entering the arena to capture profits. Joanna Gallegos, the brains behind the IR+M Tax-Aware Short Duration ETF (TAXX), is making waves in the market. In a recent interview on CNBC’s “ETF Edge,” Gallegos emphasized the importance of looking beyond traditional muni bond investments and focusing on the relative value of after-tax income.
Gallegos views actively managed municipal bond exchange-traded funds as a prime opportunity for income generation, especially in a high rate environment. Even in the face of potential interest rate cuts by the Federal Reserve, she anticipates healthy returns. TAXX boasts nearly 62% of its holdings in municipal bonds, with key muni holdings in states such as Illinois, Pennsylvania, New Jersey, New York, and Alabama.
Aside from municipal bonds, the ETF also includes exposure to corporate and securitized bonds, presenting a broader opportunity to enhance after-tax total returns. According to FactSet, TAXX is deemed “tax efficient,” striking a balance between strong after-tax income opportunities and capital preservation through a mix of municipal and taxable short-duration fixed income securities.
Gallegos highlights the impressive tax-equivalent yield of close to 6% in the portfolio, with a specific figure of 5.88%. This focus on tax efficiency underscores the importance of considering taxes in investment decisions. Despite a slight decline of 0.2% since its launch on March 14, TAXX remains a compelling option for investors seeking tax-aware strategies in the municipal funds space.
By leveraging a diversified approach and prioritizing after-tax income opportunities, tax-aware short duration ETFs like TAXX are paving the way for a new era in municipal bond investing. As investors navigate a changing economic landscape, the potential for maximizing returns while minimizing tax implications is an attractive proposition. With Gallegos at the helm, BondBloxx’s innovative ETF is poised to make a significant impact on the market, offering a fresh perspective on navigating the complexities of municipal funds.