Information and analysis of Exchange Traded Funds.
February 8, 2007 2:39 AM
While inspecting high premium funds, I noticed that tax-free municipal funds were overrepresented. In fact, of the 36 funds with premiums above 8%, 2/3 (24) were municipal funds. And of the top 10 (all with premiums above 17%), 9 were municipal funds.
So is the spectre of April 15th increasing demand (and therefore premium) for tax-free municipal funds?
Maybe. Or maybe not.
Looking into the matter further, I compared the premiums for municipal and
non-municipal funds that we are currently tracking. The results:
| Municipal Funds | Non Municipal Funds | |
|---|---|---|
| Funds | 221 | 223 |
| Premium Range | -10.09% – 25.20% | -14.02% – 21.43% |
| Mean Premium | -0.37% | -1.78% |
| Median Premium | -1.78% | -1.30% |
The range for municipal funds is shifted 4% higher, but the actual median and mean are fairly close.
(Of course, municipal funds are generally bonds, while the non municipal funds include junk bonds, oil futures, stocks, indices, real estate, and a generally more diverse portfolio, so trying to compare them is a little bit silly).