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Vanguard Group Inc., the world’s second-largest ETF issuer, is adding a pair of actively managed municipal bond funds, joining a growing trend of asset managers entering the active muni ETF space.
The Vanguard Core Tax-Exempt Bond ETF (VCRM) and Vanguard Short Duration Tax-Exempt Bond ETF (VSDM) are expected to launch before the end of 2024, according to a company press release. Both funds will be managed by Vanguard Fixed Income Group, which oversees more than $247 billion in municipal assets as of June 30.
VCRM will provide all-curve exposure to primarily high-quality, investment-grade municipal bonds offering tax-exempt income, the release said. VSDM will focus on short-duration, high-quality municipal bonds with lower interest rate sensitivity.
The funds offer “broadly diversified, low-cost municipal bond exposures with the potential to outperform the market over time,” Dan Reyes, head of Vanguard portfolio review department, said in the release.
Rockefeller Active Muni ETFs
The launches come amid rising interest in actively managed municipal bond ETFs. Rockefeller Asset Management recently introduced three new muni ETFs: the Rockefeller Opportunistic Municipal Bond ETF (RMOP), Rockefeller California Municipal Bond ETF (RMCA) and Rockefeller New York Municipal Bond ETF (RMNY)the company announced in a press release.
The Rockefeller funds were part of a larger milestone for the Tidal Financial Group, a white-lable ETF service provider, which also announced it has supported the launch of 50 ETFs in 2024.
Goldman Sachs also recently entered the active muni ETF space, launching four funds last month. These include the Goldman Sachs Ultra Short Municipal Income ETF (GUMI), Goldman Sachs Municipal Income ETF (GMUB), Goldman Sachs Dynamic California Municipal Income ETF (GCAL)and the Goldman Sachs Dynamic New York Municipal Income ETF (GMNY).
Rockefeller’s new offering, including state-specific funds for California and New York, cater to investors in high-tax states looking for tallied exposure. Goldman Sachs’ ETFs for both states can adjust their duration from two to eight years, providing flexibility to navigate changing market conditions.
Vanguard’s new ETFs will have an estimated expense ratio of 0.12%, compared to average expense ratios for competing funds of 0.37% and 0.24% as of June 30, according to Morningstar data cited in the release.
The influx of new municipal bond ETFs comes as investors seek tax-efficient strategies in a rising interest rate environment. Vanguard’s planned ETFs will join a lineup that includes the nearly $34 billion Vanguard Tax-Exempt Bond ETF (VTEB).
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