On this episode of the “ETF of the Week” podcast, VettaFi’s Head of Research Todd Rosenbluth discussed the Goldman Sachs Municipal Income ETF (GMUB) with Chuck Jaffe of Money Life. The pair discussed several topics related to the fund to give investors a deeper understanding of the ETF.

Chuck Jaffe: One fund, on point for today. The expert to talk about it. This is the ETF of the Week!

Welcome to the ETF of the Week, where we get the latest take from Todd Rosenbluth, the head of research at VettaFi. And if you go to VettaFi.com, you’ll find all the tools you need to be a savvier, smarter ETF investor, and to get more details on the newsworthy, trending, and timely ETFs that we talk about here.

Todd Rosenbluth, great to chat with you again. I’ll congratulate you, and in this process, congratulate myself on Michigan winning the NCAA championship this weekend!

Todd Rosenbluth: Well, good to be with you. Go Blue, and yeah, national champions as well!

Chuck Jaffe: I was expecting you to say that, like the ETF of the Week was something that had a ticker that was like GOBLU or BLUE, but those tickers don’t exist. So I’ll have to go back with just a regular question. Your ETF of the Week is…

Todd Rosenbluth: The Goldman Sachs Municipal Income ETF, GMUB or “G-Mub.”

Chuck Jaffe: GMUB—doesn’t roll off the tongue, but it’s the Goldman Sachs Municipal Income ETF. Why this fund now?

Todd Rosenbluth: So, Goldman Sachs actually has some ETFs that do roll off the tongue more. But I wanted to focus on municipal income. Why? Because it’s tax season. By the time people are listening and/or watching this, they hopefully will have submitted their tax returns. It’ll be almost April 15th, by that time. It’s tax season. And when tax season rolls around, we find that municipal bond strategies have a unique appeal.

Now, you might normally think, okay, people are going to pay more attention to this because they’re tax-minded, but it also creates an opportunity for municipal bonds; historically, they perform well after tax season. There’s a sell-off that often happens that I’ve seen in the data. This Goldman Sachs ETF is actively managed, which fits into a theme we’ve been talking about.

Yes, it’s fixed income, which we’ll come back to as well, is increasingly popular. It is a low-cost, broadly diversified strategy that uses the scale and experience of Goldman Sachs. That’s all in one package.

See More: Marissa Ansell on Active ETFs, Goldman Sachs Funds & More

Chuck Jaffe: Muni bonds as a bond play have been less on people’s minds than sort of everything else for a while. Is there any concern for you about just how much divisiveness we see in governments right now, and all the rest?

Because muni bonds need approval someplace. And, I mean, I live in a town right now where there’s talk of a municipal project and there’s a whole bunch of people saying, “We don’t need to spend more money,” and we’re just kind of watching this thing go, “Ooh, this could get ugly.”

Well, that can happen in muni bonds. So, the muni bond market has a lot to do with supply and demand, and not just interest rates. How much are you looking at this thinking the market itself is at a good point in supply-demand terms?

Todd Rosenbluth: So, I don’t have enough expertise to talk to you about the individual bonds that are inside this ETF and the supply. What we are seeing is there is strong demand for municipal bond ETFs in March in particular. We saw strong interest in that. There’s overall demand for fixed income, and actively managed fixed income ETFs. And active municipal bond ETFs would be a subset of that.

What I do think is beneficial is a few things. One, this is broadly diversified. So, it is not state-specific. And while there certainly is divisiveness that’s going to happen in individual states and municipalities and the federal government, municipal bonds tend to be higher quality than their corporate bond alternatives. You tend to see more AAA and AA bonds that you’d find within a municipal bond ETF than you would find in a corporate bond ETF; the credit quality tends to be much stronger.

So, I think there’s always going to be enough supply. And because this is actively managed, you have the management team being able to sort through that universe. So they’re looking at not only the primary issuance but also the secondary market to be able to find those opportunities. And the team at Goldman Sachs has many decades of experience. You know, this ETF is about 18 to 24 months — somewhere between 18 and 24 months old.

This is a team — that’s behind it — that has even more extensive experience.

Chuck Jaffe: Active management, which I know you prefer. But in bonds, expenses become super important, I’ll give away this one: they do a really good job. You’re getting active management pretty much for passive prices.

Todd Rosenbluth: You are. So, 18 basis points is the fee for this ETF. This is Goldman Sachs using its overall scale as an advantage. As mentioned, this fund is relatively new. I think it has about $250 million in assets. So, it has crossed meaningful thresholds to have viability, but isn’t too large, which might be a concern for people when they’re looking at an active ETF.

So you’re right. You are getting the benefits of active management — that security selection expertise, the ability to access the bond market, both the primary and secondary market — but you’re not paying much more than you’d be paying for an index-based product. And that adds to its appeal, also its performance. And maybe you’re going to get to it.

But this fund has outperformed index-based strategies since it’s come to market.

See More: Underweight Japan? Goldman Sachs Leaders Talk Fixed Income Decisions

Chuck Jaffe: Well, I was going to get to it, because, of course, yes, this has been a strong performer relative to its peers in the year-plus — not quite three years — that it’s been around, because it doesn’t have a three-year track record yet. What about the yield? Because nobody buys a bond fund without thinking about the yield.

Todd Rosenbluth: Right. So let me close the loop on where you started to go and then I’ll answer your question. I looked at Morningstar, and this fund was in the top decile the last calendar year. And thus far in this calendar year, I believe it’s in the top decile of the Morningstar peer group as well.

So the yield — and it’s important for us to call it out — the tax-free yield is around, I think, 3.5%. The tax-equivalent yield is over 5%. Depending upon what state you’re in, you obviously will pay individual, state, and local taxes, but you won’t pay federal taxes with a national muni bond ETF. So 5%-plus yields are pretty compelling in this environment for a higher-quality strategy that is relatively low cost; that adds a lot to its appeal.

Chuck Jaffe: And then the question that always comes up because we’re exploring funds that people may be introduced to, but they don’t want to necessarily have every ETF of the Week: How does this mix in with other things? If you’ve got general bond funds, do you want to go with a little tilt towards munis? If you have another muni fund, maybe not so much?

Todd Rosenbluth: So what we’ve found is that advisors and investors are increasingly looking at municipal bond ETFs, even if they’re not as focused on taxes. You get, of course, the tax benefit that I just talked about, but we are seeing people pair a corporate bond ETF or an AGG-like product with a municipal bond ETF to diversify where the bond payments are going to come from, to diversify where those revenue streams are going to come from.

This should fall into the investment-grade part of your bucket. There is some high-yield exposure — not a lot, but some high-yield exposure. So I tend to think of this as more of a core or core-plus complement. If you own a municipal bond strategy because you are focused on tax savings, then you might want to have a second one, because there’s the benefit of having multiple managers sorting through that universe.

You might also have one that’s more shorter-term in nature. You might have one that’s higher-yield in nature. This is going to fit more into that sweet spot — GMUB is — so you can certainly build a portfolio or complement it with this Goldman Sachs ETF.

Chuck Jaffe: It’s GMUB, the Goldman Sachs Municipal Income ETF, the ETF of the Week from Todd Rosenbluth at VettaFi. Todd, see you next week. And hopefully, we’ll be celebrating a Michigan hockey championship!

Todd Rosenbluth: You know what? The gift keeps on giving. And Go Blue to you and your audience!

Chuck Jaffe: The ETF of the Week is a joint production of VettaFi and Money Life with Chuck Jaffe. And I’m Chuck Jaffe, and you can learn all about my hour-long weekday podcast by going to MoneyLifeShow.com, or by searching for it on your favorite podcast app.

And if you want to search for more information on your favorite ETFs, or maybe your next favorite ETFs, or just the ones we talk about here, there’s no better place than VettaFi.com. Or you can get all the information you need there on X at @Vetta_Fi. Todd Rosenbluth, their head of research, my guest. He’s on X as well; he’s at @ToddRosenbluth.

The ETF of the Week is here for you every Thursday. You don’t want to miss an episode, so follow along on your favorite podcast app. And if you like it, leave a review because that stuff really does help. We’ll be back next week with another ETF for you to consider.

And until then, happy investing everybody!

Note: This article was created in part through assistance from AI tools. The content has been thoroughly reviewed and edited by the author.