T. ROWE PRICE LAUNCHES ITS FIRST ACTIVE TAX-FREE BOND EXCHANGE-TRADED FUND
T. Rowe Price (NASDAQ: TROW), a global investment management firm, has launched its first federally tax-free fixed income ETF, the Intermediate Municipal Income ETF (TAXE), now trading on NASDAQ. This ETF targets investment-grade intermediate-term municipal bonds with a maturity of 4 to 12 years and is managed by James Lynch and Charlie Hill, who bring 53 years of combined investment experience. The ETF seeks the highest level of income exempt from federal taxes and has a net expense ratio of 0.24%. This launch expands T. Rowe Price's active ETF lineup to 16, including equity and fixed income ETFs, and underlines the firm's commitment to offering diverse investment vehicles with competitive expense ratios and tax efficiency.
- Launch of first federally tax-free fixed income ETF.
- Intermediate Municipal Income ETF has a net expense ratio of 0.24%.
- ETF targets investment-grade bonds with 4-12 years maturity.
- Managed by experienced portfolio managers with 53 years combined experience.
- Expansion of active ETF lineup to 16, with diverse offerings.
- None.
Insights
The launch of the T. Rowe Price Intermediate Municipal Income ETF (TAXE) is a significant move in the market for tax-free fixed income investments. Investors should note that this product focuses on investment-grade intermediate-term municipal bonds with maturities between four and 12 years, which offers a balance between risk and return. The key advantage here is the federal tax-free income, which could be very appealing for those in higher tax brackets looking for predictable, tax-efficient income.
With a net expense ratio of 0.24%, this ETF is relatively cost-effective compared to actively managed mutual funds, aligning well with the industry trend of favoring ETFs for their lower costs and trading flexibility. However, the true value will depend on the fund's performance net of these fees, especially in a market where bond yields are fluctuating.
Investors should also consider the track record of the managers, James Lynch and Charlie Hill, who bring a combined 53 years of experience in municipal bond management. This depth of experience could be a strong indicator of the fund's potential to navigate the complexities of the municipal bond market and optimize returns.
From a tax perspective, the T. Rowe Price Intermediate Municipal Income ETF provides an attractive option for investors seeking to maximize after-tax income. Municipal bonds are exempt from federal income taxes and if the bonds are issued in the investor's state of residency, they may also be exempt from state and local taxes. This can significantly boost the effective yield compared to taxable bonds, especially for high-income individuals.
However, investors should be aware of the Alternative Minimum Tax (AMT)
Furthermore, the tax efficiency of ETFs generally enhances the appeal of TAXE. Unlike mutual funds, ETFs typically have lower capital gain distributions due to their unique structure, which can further improve the net returns by minimizing tax liabilities.
Intermediate Municipal Income ETF began trading on NASDAQ today
The Intermediate Municipal Income strategy focuses on investment-grade intermediate-term municipal bonds with a weighted average effective maturity of four to 12 years. T. Rowe Price Intermediate Municipal Income ETF is co-managed by James Lynch and Charlie Hill, who collectively have 53 years of investment experience, and have served in portfolio management roles for other T. Rowe Price intermediate-term municipal bond strategies. This ETF is a new strategy, the first of the firm's fixed income active ETFs that is distinct from existing T. Rowe Price mutual funds.
T. Rowe Price Intermediate Municipal Income ETF (Ticker: TAXE)
- Seeks the highest level of income exempt from federal income taxes consistent with moderate price fluctuation
- Net expense ratio is
0.24%
T. Rowe Price introduced its first active ETFs in August 2020, and today's launch expands the firm's active ETF lineup to 16, including five semi-transparent equity ETFs, six transparent fixed income ETFs, and five transparent equity ETFs. The active ETFs complement the firm's traditional mutual fund offerings and deliver key features associated with ETFs that some investors may prefer, such as more competitive expense ratios, tax efficiency, and the flexibility to buy and sell shares throughout the trading day.
QUOTES
Charlie Hill, Portfolio Manager, Fixed Income Division
"James and I have devoted years to fixed income investing, managing funds and separate accounts. We are excited to leverage our time-tested process into this new ETF launch."
James Lynch, Portfolio Manager, Fixed Income Division
"The Intermediate Municipal Income ETF gives investors access to T. Rowe Price's time-tested active municipal bond management, which uses rigorous proprietary credit research to identify market opportunities and manage risk."
Tim Coyne, Global Head of Exchange-Traded Funds
"For four years, we've continued to expand our ETF offerings to offer key strategies that meet the evolving needs and interests of our clients. With the launch of the Intermediate Municipal Income ETF, it was important for us to establish an offering in the federally tax-free category. We remain dedicated to delivering attractive ETFs that pair our long history of active management expertise and investment insights with the benefits of the ETF vehicle."
ABOUT T. ROWE PRICE
Founded in 1937, T. Rowe Price (NASDAQ: TROW) helps people around the world achieve their long-term investment goals. As a large global asset management company known for investment excellence, retirement leadership, and independent proprietary research, the firm is built on a culture of integrity that puts client interests first. Investors rely on the award-winning firm for its retirement expertise and active management approach of equity, fixed income, alternatives, and multi-asset investment capabilities. T. Rowe Price manages USD
Consider the investment objectives, risks, and charges and expenses carefully before investing. For a prospectus or, if available, a summary prospectus containing this and other information visit troweprice.com. Read it carefully.
ETFs are bought and sold at market prices, not NAV. Investors generally incur the cost of the spread between the prices at which shares are bought and sold. Buying and selling shares may result in brokerage commissions which will reduce returns.
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SOURCE T. Rowe Price Associates, Inc.
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