BondBloxx plans tax-aware short-duration ETF

Nov 22nd, 2023 | By | Category: Fixed Income

BondBloxx Investment Management is lining up a new actively managed fixed income ETF.

Tony Kelly, co-Founder of BondBloxx Investment Management

Tony Kelly, co-Founder of BondBloxx Investment Management.

The BondBloxx IR+M Tax-Aware Short Duration ETF will be sub-advised by Income Research + Management (IR + M), a privately owned fixed income investment management firm with over three decades of experience in active portfolio management.

The fund will be listed on NYSE Arca. No expense ratio is currently available for the ETF.

According to the ETF’s prospectus document, the fund will invest in a diversified portfolio of US dollar-denominated short-duration fixed income securities.

At least 50% of the ETF’s assets will be allocated to municipal securities with interest exempt from US federal income tax. The remainder of the portfolio may be invested across US government and agency securities, corporate bonds, mortgage-backed securities, and more. These instruments may have fixed, variable, or floating interest rates.

The majority of the ETF’s assets will be dedicated to investment-grade securities although up to 20% may be allocated to higher-risk investments like high yield or unrated bonds. The fund aims to maintain a weighted average portfolio duration of 1.5 to 2 years, though this can vary based on market conditions.

IR + M selects securities based on factors like credit quality, maturity, diversification, and expected after-tax returns. The strategy includes a tax-aware approach with IR + M managing the portfolio to minimize tax impacts, considering factors like capital gains taxes and the timing of security sales.

Tony Kelly, co-founder of BondBloxx Investment Management, said: “Municipal bonds are an important tool for taxable clients. However, investors may overlook other opportunities. By adopting a wider perspective on portfolio construction, we can create a more comprehensive approach that seeks to maximize after-tax return. The collaboration between BondBloxx and IR+M brings together experienced teams to develop fixed income solutions for clients.”

Erinn King, Chief Strategy Officer at IR+M, added: “The partnership with BondBloxx represents our first-ever IR+M branded fixed income ETF. We’re excited to broaden access to IR+M’s strategies by making them available to all investors. Our respective firms offer complementary expertise and client focus, making BondBloxx a natural strategic partner of choice for IR+M.”

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