This product invests in bonds issued by US states, local governments, and public agencies, and provides income that is exempt from federal individual income tax. Rather than simply tracking an index, it uses an active strategy that adjusts weightings according to market conditions.

It suits high-income investors who want stable cash flow while enjoying tax savings.

It is an ETF launched by Vanguard in 2024 that uses a passive (index-tracking) management approach.

The fund invests a significant portion of its assets in investment-grade municipal bonds, and it has the flexibility to allocate part of its assets to high-yield bonds to enhance returns. It adjusts the average remaining maturity to manage interest rate risk.

• Lower fees than the industry average for an active fund
• Access to Vanguard's extensive municipal bond research infrastructure

Assets under management (AUM) stand at $2.9B, and the expense ratio is 0.12% per year.

Compared with similar passive ETFs such as MUB or VTEB, it seeks extra returns through active management, while keeping its fees lower than those of another active product, JMUB, in pursuit of cost efficiency.

Prices across the municipal bond market are fluctuating sensitively in response to changes in the US Federal Reserve's interest rate policy, yet demand for tax-exempt income, particularly from high-income earners, remains steady.

Inflows continue to come steadily, mainly from wealthy individuals and institutional investors facing heavy tax burdens, and the appeal of the fund as a safe asset becomes even more prominent when concerns about an economic slowdown grow.

This is a product that offers both a clear tax benefit in the form of a federal tax exemption and the potential for results from Vanguard's professional active management.

VTEB, shown in the table, is Vanguard's flagship passive municipal bond ETF and offers a lower fee, while MUB is a standard product with high liquidity in the market. If you want to focus on a specific region or maturity, you may also consider SUB, which centers on short maturities, ITM, which tracks a specific index, or HYD, a high-yield strategy that aims to maximize returns.

US municipal bond ETFs are an efficient way to raise the overall stability of a portfolio and maximize tax savings. However, because this is an active fund, investors should first gain a deep understanding of the management team's strategy.

During periods of rising interest rates, downward pressure on bond prices can intensify, and the risk that active management results persistently trail the performance of the market benchmark index is also an important factor to consider when investing.

It is a core asset suited to long-term investors who want professional municipal bond management at a low cost. A strategic approach that uses the tax exemption to raise after-tax real returns is effective.