The VanEck Vectors Municipal Allocation ETF (“MAAX”) is currently yielding 2.91% vs. 1.86% for the Bloomberg Barclays Municipal Bond Index, as of September 30, 2019.1 For the month of September, MAAX returned -0.77% vs. -0.80% for the Bloomberg Barclays Municipal Bond Index. The recent weakness in the muni market is not overly surprising given its impressive performance in both August and year-to-date. Last month, high yield, short duration high yield and short duration investment grade muni bonds held up the best. The largest losses were experienced in long and intermediate duration investment grade municipal bonds.
Average Annual Total Returns (%) to Month End as of September 30, 2019
MAAX (Share Price)
Bloomberg Barclays Municipal Bond Index
Average Annual Total Returns (%) to Quarter End as of September 30, 2019
MAAX (Share Price)
Bloomberg Barclays Municipal Bond Index
The table presents past performance which is no guarantee of future results and which may be lower or higher than current performance. Returns reflect temporary contractual fee waivers and/or expense reimbursements. Had the ETF incurred all expenses and fees, investment returns would have been reduced. Investment returns and ETF share values will fluctuate so that investors’ shares, when redeemed, may be worth more or less than their original cost. ETF returns assume that distributions have been reinvested in the Fund at “Net Asset Value” (NAV). NAV is determined at the close of each business day, and represents the dollar value of one share of the fund; it is calculated by taking the total assets of the fund, subtracting total liabilities, and dividing by the total number of shares outstanding. The NAV is not necessarily the same as the ETF’s intraday trading value. VanEck Vectors ETF investors should not expect to buy or sell shares at NAV.
†Returns less than a year are not annualized.
Expenses: Gross 0.65%; Net 0.36%. Expenses are capped contractually at 0.08% through February 1, 2020. Expenses are based on estimated amounts for the current fiscal year. Cap exclude certain expenses, such as interest, acquired fund fees and expenses, and trading expenses.
Muni Risk Factors
Risk remains somewhat elevated in the municipal fixed income market. This risk is most evident in the heightened volatility of the U.S. 10-Year Treasury Note. In aggregate, the model is measuring an elevated level of credit risk and low duration risk. The risk is scored from 0 to 100. A score below 50 implies that risk is low and a score of 50 or higher implies that risk is high. The current credit risk score is 25 and the current duration risk score is 0. Since both of these scores are below our systemic risk threshold of 50, MAAX will maintain its overweight credit and duration risk positioning.
Credit Total Risk Score
Duration Total Risk Score
The factors that determine the total level of both credit and duration risk are momentum, volatility and mean reversion. The scoring methodology works the same here. Scores below 50 are bullish and scores 50 or higher are bearish. The trend risk score is bullish for both credit and duration risk given the recent strength in bond prices.
Credit Trend Risk Score
Duration Trend Risk Score
The volatility risk factor is signaling caution for both credit and duration. High volatility is being measured in the 10-Year U.S. Treasury Note. It is a key measure of risk because it gauges investor sentiment. The current volatility risk score is 50 for credit and 25 for duration.
Credit Volatility Risk Score
Duration Volatility Risk Score
Mean reversion risk seeks to identify divergences in typical fixed income relationships. One of our key mean reversion metrics, the ratio of municipal yields to Treasury yields, is at an extreme. This has resulted in the credit mean reversion risk score remaining elevated at a score of 25. The duration mean reversion risk remains low with a score of 0.
Credit Mean Reversion Risk Score
Duration Mean Reversion Risk Score
The high risk regime has been registered by MAAX, but risks are not yet high enough to be considered systemic. Therefore, MAAX will continue to take both credit and duration risk in the pursuit of yield.These risks will be monitored closely and MAAX’s exposures will be adjusted if the risk environment changes materially.
Click here for performance as of the most recent month end.
130-day SEC yield for MAAX was 3.23% (unsubsidized 0.53%) as of 9/30/19.
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An investment in the Fund may be subject to risks which include, fund of funds risk, high portfolio turnover, model and data risks, management, operational, authorized participant concentration and absence of prior active market risks, trading issues, market, fund shares trading, premium/discount and liquidity of fund shares and non-diversified risks. The funds may be subject to following risks as a result of investing in Exchange Traded Products including municipal securities, credit, high yield securities, tax, interest rate, call, state concentration and sector concentration risks. Municipal bonds may be less liquid than taxable bonds. There is no guarantee that a Funds’ income will be exempt from federal, state or local income taxes, and changes in those tax rates or in alternative minimum tax (AMT) rates or in the tax treatment of municipal bonds may make them less attractive as investments and cause them to lose value. Capital gains, if any, are subject to capital gains tax. A portion of the dividends you receive may be subject to AMT.
Bloomberg Barclays Municipal Bond Index is considered representative of the broad market for investment grade, tax-exempt municipal bonds with a maturity of at least one year.
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Fund shares are not individually redeemable and will be issued and redeemed at their NAV only through certain authorized broker-dealers in large, specified blocks of shares called "creation units" and otherwise can be bought and sold only through exchange trading. Shares may trade at a premium or discount to their NAV in the secondary market. You will incur brokerage expenses when trading Fund shares in the secondary market. Past performance is no guarantee of future results. Returns for actual Fund investments may differ from what is shown because of differences in timing, the amount invested, and fees and expenses.
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Portfolio Manager and Head of Portfolio and Quantitative Investment Solutions, VanEck
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