FTMS vs VTES

FTMSBFranklin Short-Term Municipal Income ETF

VTESAVanguard Short-Term Tax-Exempt Bond ETF

In short

FTMS The ETF rebuild of a short-muni strategy that has been running since 2013, managers intact. Active bond picking in an aisle where most rivals track an index: investment grade, three years or less, monthly income exempt from federal tax.

VTES Vanguard's muni ETF on a short leash: an AMT-free tax-exempt index, but capped at seven years to trim interest-rate sensitivity. Five basis points, roughly 2,700 bonds, income paid monthly.

Stated mandate

FTMS The fund seeks a high level of current income exempt from federal income tax, consistent with preserving capital.

VTES The Fund seeks to track an index representing investment-grade U.S. municipal bonds with remaining maturities from one month through seven years.

Why people hold it

• FTMS Actively managed rather than index-tracking: Franklin's muni team picks bonds across many states and sectors, mainly investment grade with maturities of three years or less.sec.govfranklintempleton.com
• Fee is 0.21% net of a waiver through March 31, 2027 (0.22% gross), near the category median for short-term muni funds.
• Pays monthly, with roughly 300 positions spread across issuers and sectors instead of a concentrated handful.
• Continuity through the wrapper change: the portfolio managers carried over from the predecessor fund, one of them on the strategy since 2016.sec.gov

• VTES Costs 0.05% a year, a fraction of what the typical muni-bond fund in its category charges. One of the cheapest ways into tax-exempt bonds.
• Maturities run one month to seven years, so the portfolio moves less on rate swings than long-dated muni funds. Short duration is the whole point here.vanguard.com
• The index is AMT-free national investment-grade munis, so interest is federally tax-exempt and not caught by the alternative minimum tax.vanguard.com
• Roughly 2,700 bonds via index sampling, run by Vanguard's fixed income group, with distributions paid monthly. It tracks its benchmark closely.vanguard.com

Worth knowing

• FTMS Index rivals undercut it on price: VTES charges 0.05% and SUB 0.07%. Active security selection is what you are paying the difference for.
• Moderately traded rather than one of the category's heavyweights, so the spread at the moment you trade deserves a look.
• Interest is exempt from federal income tax, but some holdings can pay interest subject to the AMT, and state and local taxes may still apply.sec.govfranklintempleton.com

• VTES Short maturities cut both ways. Vanguard's own materials describe moderate current income, the trade-off for less rate sensitivity than longer muni portfolios.vanguard.com
• It's a national fund, so it isn't structured to shelter state income tax the way single-state muni ETFs such as NYF are.
• Launched in 2023, it has a shorter live record than muni ETFs that have been trading for over a decade, including its broader sibling VTEB.

Full FTMS profile⁠

Full VTES profile⁠