Columbia Threadneedle Launches A New Municipal Bond ETF

Columbia Threadneedle has launched an ETF named Columbia Multi-Sector Municipal Income ETF MUST expanding on its strategic beta lineup. This ETF tries to serve as a core municipal bond allocation in investors’ portfolio. Further, it could complement the other main holdings by providing for higher tax exempt income and risk-adjusted return potential than traditional benchmark products.

“Even though most investors’ current exposure to municipals is through actively managed portfolios or individual bonds, we’ve seen a growing interest in passive products in the municipal space,” Marc Zeitoun, head of strategic beta at Columbia Threadneedle Investments, said in a note. 

Inside MUST

The fund tracks the Beta Advantage Multi-Sector Municipal Bond Index, which was created by Columbia Threadneedle’s municipal fixed-income team and is administered by Bloomberg Index Services Ltd. The index reflects a rules-based, multi-sector strategic beta approach to measure the performance of the U.S. tax-exempt bond market, comprising bonds issued by or on behalf of state or local governments. 

The interest on these bonds is exempt from regular federal income tax but may be subject to alternate minimum tax. Focus is on yield, quality, maturity, liquidity, and interest rate sensitivity of the particular eligible universe. The index tracks five segments of the municipal debt market, each having a pre-defined weight: the municipal core revenue sector (45%); health care-related debt (20%); high-quality revenue bonds (15%); general obligation bonds (10%) and high-yield debt (10%).

The index excludes bonds from California, Guam, Puerto Rico, and the U.S. Virgin Island bonds, along with other U.S. territories, commonwealths and possessions. It also excludes pre-refunded bonds, insured bonds, floaters, callable bonds with less than one year to call, tobacco bonds and derivatives.

Since its inception, the fund has amassed $15 million since its inception on Oct 10 and has an expense ratio of 0.28%.

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