Market Vectors Short High-Yield Municipal Index ETF launches

By Toni Weeks

San Luis Obispo, Calif., Jan 14 - Market Vectors ETFs announced the launch of its newest exchange-traded fund, the Market Vectors Short High-Yield Municipal Index ETF. According to a press release, the ETF (NYSE: SHYD) is the first to track an index that provides targeted exposure solely to the shorter end of the municipal yield curve.

The fund seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the Barclays Municipal High Yield Short Duration index, which is composed of publicly traded municipal bonds that cover the dollar-denominated high-yield short-term tax-exempt bond market. All bonds included in the index have a fixed rate, a dated date after Dec. 31, 1990 and a nominal maturity of one to 10 years. The fund invests at least 80% of its total assets in securities that comprise the index.

James T. Colby III and Michael F. Mazier are the portfolio managers, according to a 497 filing with the Securities and Exchange Commission.

"The shorter duration focus of SHYD may lessen the impact of a rising-rate environment, making this a potentially useful tool for investors and advisers who are looking for ways to position their fixed-income portfolios in today's uncertain rate climate," product manager Michael Cohick said in the release.

"High-yield municipal bonds continue to have historically low default rates versus their corporate counterparts and deliver income that is generally exempt from income taxes."

Credit spreads between investment-grade and high-yield short-duration municipal bonds tend to be wider than the spreads found among longer-maturity municipal bonds, Cohick noted in the release. A wider spread in short maturities may act as a cushion during times of rising interest rates, given that spreads have more room to tighten, potentially lessening the impact of declining bond prices.

According to the SEC filing, the ETF has no shareholder fees. Total annual fund operating expenses are expected to be 0.35%, which consist solely of a 0.35% management fee.

New York-based Van Eck Associates Corp. is the investment adviser to the fund.

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