Market Vectors ETFs has unveiled a new municipal income-focused ETF, the Market Vectors Short High-Yield Municipal Index ETF (SHYD), to track an index that targets exposure to the shorter end of the municipal yield curve.
The new ETF aims to replicate as closely as possible, before fees and expenses, the price and yield performance of the Barclays Municipal High Yield Short Duration Index.
The fund, which focuses on high-yield municipal bonds with one to 10 years to maturity, will invest at least 80% of its total assets in securities that comprise the benchmark index.
With a total annual operating expense ratio of 0.35%, SHYD marks as the latest addition to Market Vectors’ family of municipal income-focused ETF’s, which manages approximately $794m in assets as of 31 December 2013.
Market Vectors product manager, Michael Cohick, said: "The shorter duration focus of SHYD may lessen the impact of a rising rate environment making this a potentially useful tool for investors and advisors who are looking for ways to position their fixed income portfolios in today’s uncertain rate climate.
"High yield municipal bonds continue to have historically low default rates versus their corporate counterparts and deliver income that is generally exempt from income taxes. With all this in mind, we’re very pleased to be adding SHYD to our fund family."
"HYD’s approach, which includes bonds with maturities ranging from 1 to 30 years, can make it more interest rate sensitive than SHYD with its shorter duration focus. However, for a steady or falling rate environment, HYD may continue to offer a means of maximizing yield potential from across the broad high yield municipal yield curve," added Cohick.