-
Exchange-traded funds
-
Resources
-
Other products
Please select your role
-
Current role selection
Published August 19, 2024
One result of the US Federal Reserve’s tightening cycle has been a significant increase in the yield available for investors who desire tax-exempt income. In fact, tax-exempt yields are currently at levels not seen in more than a decade. Given this, short-term municipal bonds may offer higher income than taxable investment grade, short-term fixed income alternatives when you consider the taxable-equivalent yield advantage.
As shown below, as of July 31, 2024, Macquarie Tax-Free USA Short Term ETF (STAX) was yielding the equivalent of 6.11% from a taxable investment. What makes this opportunity so compelling, in our view, is that this is occurring at a time when municipal credit quality is generally as strong as it has been in decades.
Yield, as of July 31, 2024
Source: Bloomberg. Short-term US Treasurys are represented by the Bloomberg 1-5 Year US Treasury Index and Short-term corporates are represented by the Bloomberg Corporate Bond 1-5 Year Index. Yield values are yield to worst, which is the lowest potential yield that can be received on a bond without the issuer actually defaulting.
While an investment in bonds involves risks not associated with an investment in cash or cash equivalents, short-term municipal bonds, as represented by the Bloomberg Municipal Short (1-5 Year) Index, have delivered positive returns in 24 of the past 25 years, with an average return of 2.67%. Again, this is before factoring in the tax advantage that makes an investment in municipal bonds even more appealing.
Our investment approach emphasizes yield, which we believe is the most significant component of total return over time, and our team is led by research-driven managers with a deep understanding of municipal bond industry dynamics.
The ranking looks at one-year relative performance of fund firms that offer a diversified lineup of actively managed mutual funds and ETFs. The ranking eliminates index funds. Results are based on firms’ skill in active management. Ranking calculates returns before any 12b-1 fees are deducted. Similarly, fund loads, or sales charges are not included in the return calculations. 49 asset managers were included in Barron’s one-year ranking list for the year ending December 31, 2023. This ranking is not based on total return. The ranking is the opinion of Barron's and not Macquarie Group. No such person creating the ranking is affiliated with Macquarie Group. There can be no assurances that other providers or surveys would reach the same conclusions as this ranking. Macquarie Tax-Free USA Short Term ETF was not included in the 2023 rankings.
Exploring investment opportunities in municipal bonds may make sense for today’s income investors, not just those in the highest tax brackets. Macquarie Tax-Free USA Short Term ETF (STAX) seeks to provide attractive levels of federal tax-exempt income through municipal bonds with less sensitivity to rates. The Fund employs an investment approach that emphasizes the yield component of total return, minimizing the need to forecast interest rates and economic activity. Credit analysis is the cornerstone of the Fund’s bottom-up investment process and drives the potential for excess returns.
The performance quoted represents past performance and does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when sold or redeemed, may be worth more or less than the original cost. Current performance may be lower or higher than the performance quoted. Performance data current to the most recent month-end may also be obtained by calling 844 469-9911.
*Taxable-equivalent yield is the return that is required on a taxable investment to make it equal to the return of a tax-exempt investment. The top federal income tax bracket of 37% plus 3.8% Medicare tax were used to calculate the taxable-equivalent yield. The tax-exempt impact (light blue bar) represents the difference between the yield of the portfolio and the taxable-equivalent yield. Index performance does not reflect fund performance and past performance cannot predict future results.
The SEC 30-day yield for Macquarie Tax-Free USA Short Term ETF (STAX) is 3.64% as of July 31, 2024. Average annual returns for STAX are 0.28% for 2Q 2024, 1.03% year to date, and 2.69% since inception. The inception date is November 28, 2023. Expense ratio for STAX is 0.29%. Returns for less than one year are not annualized. Index returns are for illustrative purposes only. Index performance returns do not reflect any management fees, transaction costs, or expenses. Indices are unmanaged and one cannot invest directly in an index.
This material must be preceded or accompanied by a prospectus. Click here for the most recent prospectus.
The Macquarie ETF Trust Funds are distributed by Foreside Financial Services, LLC. Foreside Financial Services, LLC is not affiliated with any Macquarie entity, including Macquarie Asset Management and Delaware Distributors, L.P.
Macquarie ETF Trust exchange-traded funds (ETFs) are actively managed and do not seek to replicate a specific index. ETF shares are bought and sold through an exchange at the then current market price, not net asset value (NAV), and are not individually redeemed from the fund. Shares may trade at a premium or discount to their NAV when traded on an exchange. Brokerage commissions will reduce returns. There can be no guarantee that an active market for ETFs will develop or be maintained, or that the ETF's listing will continue or remain unchanged.
Investing in any exchange-traded fund involves the risk that you may lose part or all of the money you invest. Over time, the value of your investment in the Fund will increase and decrease according to changes in the value of the securities in the Fund’s portfolio. An investment in the Fund may not be appropriate for all investors.
The Bloomberg Municipal Short (1-5 Year) Index measures the total return performance of investment grade, US tax-exempt bonds with maturities from 1 to 5 years. The Bloomberg 1-5 Year US Treasury Index measures the performance of US Treasury securities with a maturity from one up to (but not including) five years. The Bloomberg US Corporate Bond 1-5 Year Index is composed of US dollar-denominated, investment grade corporate bonds that are US Securities and Exchange Commission (SEC)-registered or 144A with registration rights, and issued by industrial, utility, and financial companies, and with a maturity from one up to (but not including) five years.
The Fund’s principal risks include but are not limited to the following:
Market risk is the risk that all or a majority of the securities in a certain market – like the stock market or bond market – will decline in value because of factors such as adverse political or economic conditions, future expectations, investor confidence, or heavy institutional selling.
Governments or regulatory authorities may take actions that could adversely affect various sectors of the securities markets and affect fund performance.
Fixed income securities can lose value, including the possible loss of principal. An issuer of a fixed income security may be unable to make interest payments and/or repay principal in a timely manner. The prices of bonds and other fixed income securities will increase as interest rates fall and decrease as interest rates rise. Fixed income securities with longer maturities or duration generally are more sensitive to interest rate changes.
The principal on a fixed income security may be prepaid prior to maturity, which may require reinvestment at a lower interest rate.
High yield securities (“junk bonds”) are subject to reduced creditworthiness of issuers, increased risk of default, and a more limited and less liquid secondary market. High yield securities may also be subject to greater price volatility and risk of loss of income and principal than higher-rated securities.
Substantially all dividend income derived from tax-free funds is exempt from federal income tax. Some income may be subject to state or local and/or the federal alternative minimum tax (AMT) that applies to certain investors. Capital gains, if any, are taxable
Investing with a focus on companies that exhibit a commitment to sustainable practices may result in the Fund investing in certain types of companies, industries or sectors that the market may not favor. The securities of such companies may underperform the stock market as a whole and, the criteria used to select companies for investment may result in the Fund investing in securities that underperform securities of companies that do not exhibit such a commitment to sustainability.
The Funds are actively managed. The Manager applies a Fund's investment strategies and selects securities for the Fund in seeking to achieve the Fund's investment objective(s). There can be no guarantee that its decisions will produce the desired results, and securities selected by a Fund may not perform as well as the securities held by other exchange-traded funds with investment objectives that are similar to the investment objective(s) of the Fund. In general, investment decisions made by the Manager may not produce the anticipated returns, may cause a Fund's shares to lose value or may cause a Fund to perform less favorably than other exchange-traded funds with similar investment objectives.
The Fund is an ETF, and, as a result of an ETF’s structure, it is exposed to the following risks: “Authorized participants, market makers and liquidity providers concentration risk,” “Secondary Market Trading Risk” and “Shares may trade at prices other than NAV risk.”
Only authorized participants (“APs”) may engage in creation or redemption transactions directly with the Fund. The Fund has a limited number of financial institutions that are institutional investors and may act as APs. In addition, there may be a limited number of market makers and/or liquidity providers in the marketplace, and they have no obligation to submit creation or redemption orders. To the extent either of the following events occur, the Fund’s shares may trade at a material discount to net asset value (“NAV”) and possibly face delisting: (i) APs exit the business or otherwise become unable to process creation and/or redemption orders and no other APs step forward to perform these services, or (ii) market makers and/or liquidity providers exit the business or significantly reduce their business activities and no other entities step forward to perform their functions. These events, among others, may lead to the Fund’s shares trading at a premium or discount to NAV. A diminished market for an ETF's shares substantially increases the risk that a shareholder may pay considerably more or receive significantly less than the underlying value of the ETF shares bought or sold.
Although the Fund’s shares are listed on a national securities exchange, The New York Stock Exchange (“Exchange”), and may be traded on U.S. exchanges other than the Exchange, there can be no assurance that an active or liquid trading market for them will develop or be maintained. In addition, trading in the Fund’s shares on the Exchange may be halted. In addition, an exchange or market may issue trading halts on specific securities or financial instruments. As a result, the ability to trade certain securities or financial instruments may be restricted, which may disrupt the Fund’s creation/redemption process or affect the price at which shares trade in the secondary market.
As with all ETFs, shares of the Fund may be bought and sold in the secondary market at market prices. The Fund’s NAV is calculated at the end of each business day and fluctuates with changes in the market value of the Fund’s holdings, while the trading price of the shares fluctuates continuously throughout trading hours on the Exchange, based on both the relative market supply of, and demand for, the shares and the underlying value of the Fund’s holdings. As a result, although it is expected that the market price of the Fund’s shares will approximate the Fund’s NAV, there may be times when the market price of the Fund’s shares is more than the NAV intra-day (premium) or less than the NAV intra-day (discount). This risk is heightened in times of market volatility or periods of steep market declines.
Transactions in shares of ETFs will result in brokerage commissions and will generate tax consequences. All regulated investment companies are obliged to distribute portfolio gains to shareholders.
Shares of ETFs are bought and sold at market price (not NAV) and are not individually redeemed from the fund. Any applicable brokerage commissions will reduce returns.
The Fund is a newly organized, diversified management investment company with no operating history. In addition, there can be no assurance that the Fund will grow to, or maintain, an economically viable size, in which case the Board of Trustees of the Trust (the “Board") may determine to liquidate the Fund.
All third-party marks cited are the property of their respective owners.
Nothing presented should be construed as a recommendation to purchase or sell any security or follow any investment technique or strategy.
Macquarie Asset Management (MAM) is the asset management division of Macquarie Group. MAM is an integrated asset manager across public and private markets offering a diverse range of capabilities, including real assets, real estate, credit, equities and multi-asset solutions. Macquarie Group refers to Macquarie Group Limited and its subsidiaries and affiliates worldwide. Delaware Funds by Macquarie refers to certain investment solutions that MAM distributes, offers, or advises. Investment advisory services are provided to the Delaware Funds by Delaware Management Company, a series of Macquarie Investment Management Business Trust (MIMBT), a Securities and Exchange Commission (SEC) registered investment adviser. The Delaware Funds are distributed by Delaware Distributors, L.P., a registered broker/dealer and member of the Financial Industry Regulatory Authority (FINRA) and an affiliate of MIMBT.
Other than Macquarie Bank Limited ABN 46 008 583 542 (“Macquarie Bank”), any Macquarie Group entity noted in this document is not an authorized deposit-taking institution for the purposes of the Banking Act 1959 (Commonwealth of Australia). The obligations of these other Macquarie Group entities do not represent deposits or other liabilities of Macquarie Bank. Macquarie Bank does not guarantee or otherwise provide assurance in respect of the obligations of these other Macquarie Group entities. In addition, if this document relates to an investment, (a) the investor is subject to investment risk including possible delays in repayment and loss of income and principal invested and (b) none of Macquarie Bank or any other Macquarie Group entity guarantees any particular rate of return on or the performance of the investment, nor do they guarantee repayment of capital in respect of the investment.
© 2024 Macquarie Management Holdings, Inc.
Not FDIC Insured • No Bank Guarantee • May Lose Value
You can check the background of your investment professional on FINRA's BrokerCheck.
[3757942-08/24 | MET-584320]