Goldman Sachs launches its first muni ETF

Goldman Sachs Asset Management launched the company’s first muni exchange-traded fund last week: the Goldman Sachs Community Municipal Bond ETF.

“This is something that we don’t see as a short-term trend, but rather [something] that’s going to continue to grow over time,” Alexa Gordon, municipal bond portfolio manager at Goldman Sachs said of muni ETFs.

Goldman Sachs worked with its ETF team and Bloomberg to develop the underlying index. “Given the growth of our municipal platform, as well as the growth of the ETF platform at large, we are able to work together closely to develop the strategy,” she said.

The ETF launched Thursday, March 9.  It offers exposure to tax-exempt municipal securities with the goal of maximizing tax efficiency, and targets allocation into municipalities and projects with a positive effect, giving the chance to invest in community-related projects, including education, healthcare and clean energy.

The ETF concentrates on investment-grade municipal bonds with one- to 15-year maturities in an effort to reduce risk. In comparison to the larger municipal market, the portfolio will aim to provide diversified market exposure with lower duration and better credit quality.

Goldman Sachs did some selective premarketing, and Gordon said clients took advantage of the opportunity to invest in the one- to 15-year space, which is traditionally a part of the muni retail curve where “some of the clients are excited because of the lower duration.”

“We’ve seen a lot of positive results there,” she said.

She noted, munis are community-oriented, “so the title and then the thematic approach of just inherently allocating capital toward many cities, states, communities, education facilities, essential services [and] water sewer programs was a natural fit for our clients who see building sustainable communities as a long-term portion of their asset allocation,” she said.

The muni ETF fits nicely into this suite of Goldman Sachs’ products, Gordon added. The firm currently has three open-ended mutual funds and a separately managed account platform. “Having this ETF as another way for our clients to access the market is something that will round out our offerings,” she said.

This ETF is Goldman Sachs’ first dip into the muni ETF space. She believes the tax-free income, the investment in the community and the lower risk opportunity is one that fits nicely with the needs of its existing client base.

The company has been working on this ETF for the past year and a half.

“The goal for us is to be able to service our clients in the best way possible. So it matters less of the type of structure or wrapping that our clients can access the market in,” Gordon said. “And this was clearly a hole in the market from the Goldman offering standpoint.”

This, she said, allows clients to “access the municipal market in a different structure and format along with the fact that there aren’t any players in the short end of the space in a passive format that allow this broad access to the investment-grade universe.”

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