BlackRock launches its first active muni bond ETFs

Mar 22nd, 2021 | By | Category: Fixed Income

BlackRock has launched two new ETFs in the US which the issuer’s first to provide actively managed exposure to the municipal bond market.

Peter Hayes, Chief Investment Officer and Head of the Municipal Bond Group.

Peter Hayes, Chief Investment Officer and Head of BlackRock’s Municipal Bond Group.

The BlackRock Intermediate Muni Income Bond ETF (INMU US) targets investment-grade municipal bonds located in the middle of the yield curve, maintaining a portfolio duration between four and six years.

It has listed on NYSE Arca and comes with an expense ratio of 0.30%.

The BlackRock High Yield Muni Income Bond ETF (HYMU US), meanwhile, invests at least two-thirds of its assets in high-yield municipal bonds, focusing on securities with more than five years remaining to maturity. Up to 20% of the portfolio may be allocated to distressed securities.

It has listed on Cboe BZX Exchange and costs 0.35%.

Both funds are transparent active ETFs that disclose their holdings on a daily basis. Each has come to market with $25 million in assets under management.

In constructing the portfolios, the funds’ managers leverage the expertise of BlackRock’s Municipal Bond Group which comprises more than 55 investment professionals and manages over $164 billion in assets across mutual funds, closed-end funds, separately managed accounts, and ETFs.

The group is led by Chief Investment Officer Peter Hayes whose tenure with the firm dates back to 1987, including his years with Merrill Lynch Investment Managers which merged with BlackRock in 2006.

According to Hayes, the ETFs will take advantage of the flexibility that active management provides to maximize tax-free current income while managing appropriate levels of interest rate and credit risk.

“We strive to offer investors a complete suite of municipal bond choices to pursue their tax-advantaged investment goals,” said Hayes. “Through product innovation and utilizing the breadth of our municipal bond platform, these active ETFs will help enhance the income choices for our clients. Actively managing these new ETFs allows us to capitalize on opportunities while also avoiding challenged areas, which can be especially important when investing in the municipal space.”

The funds complement BlackRock’s index-based municipal ETF suite which consists of 12 funds collectively housing over $29bn in assets. The suite’s flagship product is the $21bn iShares National Muni Bond ETF (MUB US), the largest municipal bond ETF in the industry, which provides broad exposure to investment-grade municipal bonds for a low fee of just 0.07%.

Chad Slawner, Head of US iShares Product, added: “The expansion of our municipal bond franchise into the active ETF market represents an important milestone for our firm. Bringing one of our most prominent investment teams into the ETF ecosystem through an active transparent structure is another example of our commitment to innovation. These new funds complement our line-up of index-based solutions and actively managed mutual funds.”

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