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Van Eck Plans Muni, EM Bond ETFs

Hung Tran

Van Eck Global, the money management firm behind the Market Vectors ETFs, is prepping a pair of fixed-income funds that will provide investors with exposure to debt from U.S. territories as well as emerging markets.

One of the funds is the Market Vectors Puerto Rico Municipal Index ETF, which tracks the Barclays Custom Puerto Rico Municipal Composite Index, according to a regulatory filing . The index consists of dollar-denominated muni bonds from the U.S. Territories of Puerto Rico, Guam, the Virgin Islands, American Samoa and the Northern Mariana Islands.

Municipal bonds issued from Puerto Rico are tax free because of the island’s status as a U.S. commonwealth. Investors who buy municipal bonds issued by the Puerto Rican government are exempt from federal, state and local interest-income taxes. Currently, Puerto Rican muni bonds are yielding 7 percent in tax-free interest per year, according to IndexUniverse analysts.

However, Market Vector’s latest offering is not the only muni bond game in town that offers exposure to Puerto Rican munis. Invesco PowerShares currently offers three ETFs that serve up some exposure to that market.

The PowerShares Insured California Municipal Bond (PWZ), the PowerShares Insured New York Municipal Bond (PZT) and the PowerShares Insured National Municipal Bond (PZA) each offer varying degrees of exposure to the Puerto Rico municipal bond market, with allocations currently ranging roughly between 6 and 11 percent.

In addition, Van Eck also put in the regulatory pipeline the Emerging Markets Short-Term Corporate Bond ETF, which will track the BofA Merrill Lynch 0-5 Year U.S. Emerging Markets Liquid Corporate Plus Index, according to a regulatory filing .

The index comprises short-term, U.S.-dollar-dominated bonds issued by emerging markets nonsovereign issuers, and includes investment-grade as well as below-investment-grade-rated securities.

Neither filing disclosed planned tickers or fees.

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