In the ever-evolving world of ETFs, BondBloxx’s Joanna Gallegos has introduced a new player to the field – the IR+M Tax-Aware Short Duration ETF (TAXX). Launched just under a month ago, this ETF aims to go beyond traditional municipal bond portfolios and focus on the relative value of after-tax income. Gallegos, the firm’s co-founder and COO, believes that actively managed municipal bond ETFs present an income-generating opportunity, especially in a high rate environment. Despite possible interest rate cuts by the Federal Reserve, she remains optimistic about the potential for healthy returns.

With almost 62% of TAXX’s holdings in municipal bonds, the ETF offers exposure to various states such as Illinois, Pennsylvania, New Jersey, New York, and Alabama. Additionally, it includes corporate and securitized bonds in its portfolio. BondBloxx touts the fund’s mixed-bond strategy as a way to widen the opportunity for increased after-tax total returns. FactSet describes TAXX as “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.

One of the key selling points of TAXX is its tax-equivalent yield, which currently sits close to 6%. Gallegos highlights this yield, stating that it stands at approximately 5.88%. In a year where tax planning is crucial, this high tax-equivalent yield could appeal to investors looking to maximize their after-tax returns. Despite its recent launch on March 14, TAXX has experienced a slight dip of 0.2% as of Friday.

The Future of Municipal Bond ETFs

As investors continue to search for tax-efficient opportunities in the ETF space, products like TAXX are reshaping the landscape of municipal fund investments. By offering a unique blend of municipal, corporate, and securitized bonds, ETFs like TAXX provide investors with a diversified approach to after-tax returns. With a focus on capturing profits while navigating changing interest rate environments, tax-aware ETFs are carving out a niche in the market for savvy investors looking to optimize their investment strategies.

The introduction of tax-aware ETFs like TAXX represents a new wave of innovation in the municipal funds space. By emphasizing after-tax income opportunities and offering a diverse portfolio mix, these ETFs are poised to attract investors seeking tax-efficient investment options. As the investment landscape continues to evolve, keeping an eye on the performance and yields of tax-aware ETFs like TAXX could prove beneficial for investors looking to stay ahead in a changing market environment.


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