A Different Kind of Muni Bond ETF: Van Eck Debuts XMPT
Michael Johnston submits:Van Eck has introduced the Market Vectors CEF Municipal Income ETF (XMPT), giving investors another option for accessing a corner of the U.S. bond market that has been the subject of heated debate in recent weeks. The new ETF will seek to replicate the S-Network Municipal Bond Closed End Fund Index, a benchmark that includes U.S. CEFs that are designed to produce federally tax-exempt annual yield. Currently, the underlying index consists of about 88 closed end funds. Almost 95% of the underlying index is investment grade debt.
Closed end funds are investment companies that trade throughout the day like stocks and ETFs. Unlike exchange-traded products, however, CEFs don’t feature the same creation/redemption mechanism that keeps prices consistently in line with the net asset value (NAV) of the underlying holdings. As such, CEFs often trade at a discount or premium to NAV, introducing additional risk factors but also allowingComplete Story »