Astute investors are often on the lookout for unique strategies that yield better returns, which many might overlook. One such strategy involves leveraging after-tax income. An adept fund manager can devise a plan to yield superior after-tax returns compared to conventional market offerings.
The BondBloxx IR+M Tax-Aware Short Duration ETF (TAXX) is a prime example of such a strategy. This fund is designed to help investors secure after-tax income while preserving capital.
TAXX provides a diversified portfolio, with a minimum of half of its assets invested in municipal bonds. According to recent BondBloxx literature, this asset class “offers compelling after-tax relative value,” prompting recommendations to increase allocations to the sector.
Additionally, a significant portion of TAXX’s assets is allocated to taxable short-duration bonds. This diverse mix of fixed-income assets offers extensive opportunities to secure after-tax returns.
To achieve its objectives, TAXX’s fund managers employ a disciplined, bottom-up approach to security selection. Potential portfolio additions must undergo rigorous fundamental credit analysis and demonstrate both liquidity and robust after-tax relative value. This methodology ensures the creation of a diversified, high-quality portfolio of fixed-income instruments.
The majority of assets in TAXX’s portfolio have maturities ranging from less than one year to three years. This shorter duration helps investors capture returns while minimizing volatility from potential long-term interest rate fluctuations.
TAXX’s strategy is already delivering impressive tax-efficient returns. As of May 31st, 2024, the fund boasts a tax equivalent yield of 6.11%. Having launched just over three months ago, the fund has already attracted more than $39 million in inflows.
This fund exemplifies how investors can achieve both after-tax returns and asset diversification within a single fixed-income portfolio. With an active management team at the helm, TAXX is well-positioned to navigate fluctuations in interest rates and credit spreads, providing investors with both yield and capital preservation.
Source: ETF Trends
