ALPS launches intermediate municipal bond ETF

May 31st, 2022 | By | Category: Fixed Income

SS&C ALPS Advisors has launched a new fixed income ETF providing actively managed exposure to an intermediate-duration portfolio of municipal bonds.

Laton Spahr, President of SS&C ALPS Advisors

Laton Spahr, President of SS&C ALPS Advisors.

The ALPS Intermediate Municipal Bond ETF (MNBD US) has been listed on NYSE Arca with an expense ratio of 0.50%.

The fund is sub-advised by Brown Brothers Harriman (BBH), the oldest and one of the largest private investment banks in the United States.

Gregory S. Steier, BBH’s co-Head of Fixed Income, leads the ETF’s portfolio management, bringing over 30 years of financial industry experience.

BBH employs a bottom-up investment approach to security selection, building a balanced portfolio of investment-grade municipal bonds providing high tax-free yields with a secondary objective of capital growth.

Fixed and variable-rate securities are both eligible for inclusion, while the ETF is expected to favour higher-yielding revenue bonds over general obligation bonds. BBH utilizes proprietary fundamental research to identify durable securities that are expected to be resilient across a variety of economic and political environments.

Each security is assessed across four fundamental pillars: Durability, which favours securities that finance essential services or critical infrastructure; Transparency, which favours issuers that make timely disclosures and do not restrict access to management; Structure, which favours issuers with appropriate amounts of leverage and credit protections; and Management, which favours issuers that are long-term oriented and treat all their stakeholders fairly.

ESG factors are also considered, although issuers with sub-standard ESG profiles will not automatically be excluded from selection.

Under normal circumstances, the ETF’s dollar-weighted average duration is expected to be between three and seven years.

According to BBH, the ETF may serve to enhance investors’ portfolios by providing monthly tax-free dividends with a historically low correlation to equities. It may also deliver potentially attractive long-term risk-adjusted returns throughout interest rate and credit cycles, all the while protecting capital due to the fund’s high-quality ballast.

Commenting on the launch, Laton Spahr, President of SS&C ALPS Advisors, said: “SS&C ALPS Advisors continues to deliver a robust suite of active ETF strategies for allocators and investors. Our partner, BBH, is one of the most experienced managers in the marketplace with decades of experience actively managing municipal bonds. Their unique approach to identifying undervalued municipal securities and building diversified portfolios provides investors with tax-free income, the potential for capital appreciation, and disciplined risk management.”

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