VanEck’s muni bond ETF kept all 49 holdings intact during its fourth quarter rebalance but executed an internal rotation favoring higher-yielding funds over investment-grade names, according to index data from VettaFi.
The shift reflects positioning for investors seeking tax-exempt income in a market where the S-Network Municipal Bond Closed-End Fund Index, which the VanEck Vectors CEF Municipal Income ETF (XMPT) tracks, shows a 6.3% yield compared to the 1-year Treasury rate of 3.5%, according to the index’s factsheet.
During the December 31 rebalance, XMPT reduced exposure to quality-focused holdings like the Nuveen Quality Municipal Income Fund, which saw its weight drop 0.89%, and the Nuveen Municipal Credit Income Fund, down 0.70%, according to the data.
Capital flowed instead to Nuveen Municipal High Income Opportunity Fund, which gained 0.53% in index weight, and BlackRock MuniVest Fund II, up 0.31%, according to the data. BlackRock Municipal Income Trust added 0.24% while BlackRock MuniYield Quality Fund increased 0.22%.
The rotation moved capital from the largest quality-focused holdings into higher-yielding, credit-focused funds. The index methodology uses a modified total net assets weighting system designed to provide exposure across different segments of the tax-exempt closed-end fund market, according to VettaFi.
The rebalance maintained the index’s sector composition at 67.7% leveraged funds, 25.7% leveraged high yield funds, and 6.6% unleveraged funds, according to the factsheet.
