According to Van Eck, the fund will give investors access to the largest corner of the closed-end fund (CEF) universe in a liquid, transparent way. XMPT is intended to track, before fees and expenses, the performance of the S-Network Municipal Bond Closed-End Fund Index (CEFMX), an index composed of shares of municipal bond closed-end funds listed in the United States that are principally engaged in asset management processes designed to produce federally tax-exempt annual yield.
XMPT carries a gross expense ratio of 1.57% and a net expense ratio of 1.43%, and the expenses (excluding interest expense, offering costs, trading expenses, taxes, extraordinary expenses, and acquired fund fees and expenses) are capped contractually until September 1, 2012, at 0.40%. The fund expects to distribute a monthly dividend that, if properly reported as exempt-interest dividends, may not be subject to regular U.S. federal income tax. As of June 30, 2011, CEFMX had a distribution yield of 6.71%.
“Investors and their advisers have long been attracted to tax-exempt closed-end funds which can offer attractive yields and, in some cases, sell at a discount to the underlying value of the portfolio assets,” said Jan van Eck, Principal at Van Eck Global. “XMPT’s index is well-diversified by credit, strategy, and manager, focusing on higher quality assets, and designed to take advantage of closed-end funds’ tendency to trade at a discount.”
The Network Municipal Bond Closed-End Fund Index had 88 constituents as of June 30, 2011, divided amongst four main sectors:
- leveraged municipal fixed-income CEFs (84.4 %),
- unleveraged municipal fixed-income CEFs (8.85%),
- leveraged high-yield municipal fixed-income CEFs (3.83%),
- unleveraged high-yield municipal fixed-income CEFs (2.92%).
Van Eck claims the index methodology assigns a greater weight to closed-end funds trading at discounts.
XMPT is Van Eck’s 35th Market Vectors ETF and is the ninth fund to join its family of fixed-income ETFs, which span municipal, international, and corporate bond categories:
- LatAm Aggregate Bond ETF (BONO),
- Emerging Markets Local Currency Bond ETF (EMLC),
- High-Yield Municipal Index ETF (HYD),
- Intermediate Municipal Index ETF (ITM),
- Long Municipal Index ETF (MLN),
- Pre-Refunded Municipal Index ETF (PRB),
- Short Municipal Index ETF (SMB),
- Market Vectors Investment Grade Floating Rate ETF (FLTR).
Van Eck also noted that funds of bond funds, such as XMPT, being able to pass through tax-exempt income from their holdings is a relatively new development, only becoming law as of December 22, 2010.