VanEck to move $6.6bn in muni ETFs to new benchmarks

VanEck will switch the benchmarks for five municipal bond ETFs with a combined $6.6bn in assets, filings show.

The ETFs will swap their existing Bloomberg indices for benchmarks run by Intercontinental Exchange, effective March 2, the company has disclosed.

VanEck ETFs already used bond pricing data from ICE Data Services and now VanEck wanted to use indices from the same provider, said Mike Cohick, director of ETF product at VanEck.

The New York City-based company began using data from Interactive Data to calculate ETF net asset values when it launched its first ETFs in 2006, VanEck said. ICE Data Services acquired Interactive Data in 2015.

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Bloomberg indices, such as the ones VanEck’s ETFs track, use a proprietary pricing business, BVAL, to calculate NAVs. The use of such data can create pricing differences and artificial tracking errors between the Bloomberg indices and the bond pricing data from ICE, Cohick said.

“We believe our fund shareholders will be better served by licensing indices that use the same pricing source as it is used to calculate our NAVs, which is expected to eliminate this artificial slippage,” he added.

The five VanEck ETFs switching indices are the $3.7bn VanEck High Yield Muni ETF, $1.9bn Intermediate Muni ETF, $424.8m Short High Yield Muni ETF, $333.8m Short Muni ETF and $259.2m Long Muni ETF, filings show.

As part of the transition, funds may also deviate from their investment strategies, the filings state.

Once the changes are complete, each of the five ETFs will invest at least 80 per cent of their total assets in securities comprising the new ICE indices, according to Monday’s filings. This policy can change without shareholder approval but would be preceded by 60 days of advanced notice.

Seven other VanEck ETFs also use ICE indices, VanEck said. Those are the $13bn Gold Miners ETF, $5.2bn Fallen Angel High Yield Bond ETF, $1.3bn Emerging Markets High Yield Bond ETF, $1.1bn Preferred Securities ex Financials ETF, $119m Steel ETF, $95m International High Yield Bond ETF and $78.2m Environmental Services ETF.

Altogether, VanEck has 60 ETFs with a combined $62.2bn in assets, according to Morningstar Direct.

BlackRock, Invesco, State Street Global Advisors and Direxion have also recently moved or announced plans to move to indices run by ICE Data Services. ICE acquired Bank of America’s index unit almost four years ago.

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