Looking For Yield? F/m's New ETF Pays Monthly—And Keeps It Tax-Free

As the Federal Reserve considers more rate reductions, F/m Investments is introducing a new fund to capture short-duration, tax-free income.

The F/m Ultrashort Tax-Free Municipal ETF (NASDAQ:ZMUN) focuses on callable municipal bonds. It aims to provide investors with a new opportunity to generate attractive yields without venturing into the long-duration space.

The ETF, which tracks the Bloomberg Municipal Bond Currently Callable Index, is the first callable-only muni ETF. This area of the fixed-income universe is usually underinvested in by passive managers. The fund’s approach focuses on high-coupon municipal debt that is about to be called, seeking to balance consistent, federally tax-exempt cash flow with reduced interest rate sensitivity.

Also Read: AMD-OpenAI Mega Deal Ignites 77% Surge In This ETF

Alexander Morris, CEO of F/m Investments, said that by targeting high-coupon municipal bonds near call dates, ZMUN seeks to deliver compelling yields with reduced duration risk.

With an average life of less than one year and an AA credit rating profile, ZMUN offers a combination of tax-free income, portfolio stability, and monthly cash flow—attributes that make it a viable alternative to money market funds for high-income investors.

F/m’s Portfolio Manager Justin Henessey calls the ETF launch “a timely move.”

“The launch of ZMUN comes at a pivotal moment for municipal bonds, as record issuance and policy uncertainty have elevated yields for high-quality issuers and investors are seeking to lock in federally tax-exempt income before expected Fed rate cuts,” Henessey stated.

The ETF is an extension of the company’s Genoa Enhanced Income Municipal strategy, which has a Five-Star Morningstar rating through June 2025. Packaging that strategy in the ETF wrapper provides investors with ETF-grade liquidity, transparency, and tax efficiency, according to F/m.

The fund tracks the Bloomberg Municipal Bond Currently Callable Index.

ZMUN becomes the latest addition to the company’s expanding suite of fixed-income ETFs, namely the U.S. Benchmark Series, the U.S. Credit Series, and the Compoundr Series, together with F/m’s growing reach into alternative Treasury and credit exposures. The firm now manages over $18 billion in assets.

Read Next:

• ETF 2.0: SEC's New Rule Hands Big Fund Houses A Massive Advantage

Image: Shutterstock

© 2020 Benzinga.com - Benzinga does not provide investment advice. All rights reserved.