MacKay's new muni ETF matches Capital Group's credit rule and waives its fee to 0.34%

New York Life Investment Management listed the NYLIM MacKay Muni High Income ETF, —MMHI, on Thursday, October 1. It seeks high income from municipal bonds, the debt of states and cities, usually free of regular federal income tax. Its credit rule is the one Capital Group already runs.

The prospectus, dated Tuesday, September 22, says the fund typically keeps at least 60% of net assets in municipal bonds rated BBB+ or Baa1 or below, or in unrated bonds the manager judges similar. Capital Group's municipal high-income fund, ACGHM, normally keeps at least 60% in bonds rated BBB+ or Baa1 or below, or in unrated bonds the manager judges equivalent. Listed in June 2024, it holds $3.29 billion and charges 0.34%, gross and net.

BBB+ and Baa1 are not the bottom of investment grade. The bottom is BBB- and Baa3, so the 60% can be met without a bond below investment grade. The prospectus also lets the fund own bonds of any rating, or none.

At the launch, New York Life said the managers leave out bonds from issuers in serious trouble, and bonds that have stopped paying interest.

As of Sunday, October 4, the largest holding was a Dreyfus government money-market fund, at 14%. Fourteen other positions, each worth $1 million, made up 56% of the fund. They reset their interest rates instead of locking in one yield. Thirteen are municipal bonds. One is a variable-rate holding in the Nuveen AMT-Free Municipal Credit Income Fund, a closed-end fund.

With the money-market fund, those slices are 70% of assets. Smaller fixed-coupon bonds sit beside them, including a Puerto Rico sales-tax bond that also ranks near the top of the large high-yield municipal ETFs.

A 0.40% cap remains after the waiver

The management fee is 0.40%, and a contractual cap holds a defined set of expenses there unless the board ends it. A further waiver takes that set down to 0.34% until Saturday, August 28, 2027. The prospectus shows 0.69% before the waivers. The other expenses in that figure are an estimate, written before the fund started. The caps leave out some costs, including fees of funds held in the portfolio.

After August 2027, that 0.40% cap sits next to the 0.39% on BlackRock's active high-yield municipal fund, BHIMU.

—MMHI has $25 million, next to funds that already hold between $2.46 billion and $3.92 billion. Assets below are the latest figures, as of the start of this week, and the fees are what each fund charges now.

The fund intends to pay income monthly. Its distribution page has not posted a 30-day SEC yield, the standard income rate a fund reports on its portfolio.

ACGHM shows 4.27% on that measure, gross and net, as of Monday, August 31. BHIMU shows 5.47% as of Thursday, October 1.