Goldman Sachs makes bigger bet on $129B muni ETF market

Goldman Sachs makes bigger bet on $129B muni ETF market is profiled by BTW Media because public-source evidence links it to internet infrastructure, governance, operational dependencies, or market visibility.

• Goldman Sachs has launched four new municipal bond ETFs, including dedicated funds for New York and California investors.
• Despite a slowdown in muni ETF inflows in 2024, June saw a rebound at over $2 billion, making it the strongest month of the year.

OUR TAKE
Goldman Sachs Asset Management is expanding its presence in the estimated $129 billion municipal bond market with the launch of four new actively managed ETFs. These offerings are specifically targeted at investors in high-tax states such as New York and California, and take advantage of the tax-exempt nature of municipal bonds. The launches include an ultra-short municipal bond fund and a New York-focused tax-exempt bond fund. Despite a slowdown in muni ETF inflows to $5.4bn in 2024 from more than $15bn a year earlier, Goldman Sachs is aiming to capture interest in tax-efficient investments and compete with major players such as BlackRock and Vanguard. This approach shows Goldman Sachs’ commitment to diversifying its portfolio and enhancing its offerings in a competitive financial landscape.
Heidi Luo, BTW reporter

What happened

Goldman Sachs Asset Management, the investment arm of Goldman Sachs, has launched four new municipal bond ETFs as it looks to expand its influence in the approximately $129 billion state and local government bond market.

These new offerings are actively managed, with specific funds tailored for investors in high-tax states such as New York and California, and focus on the unique tax-exempt benefits of these bonds.

This initiative is part of a broader shift towards ETFs, which are generally more cost effective than traditional mutual funds. The new products include a fund dedicated to ultra-short municipal bonds and another that invests exclusively in tax-exempt debt issued by New York entities.

“The company wanted to stick to its DNA and its strong track record in actively managed muni funds. This is a suite of products that we want to have on the shelf and that our clients are asking us to have on the shelf,” said Brendan McCarthy, global head of ETF distribution at Goldman Sachs Asset Management

Also read: Goldman’s hedge-fund clients get more active with crypto options

Also read: U.S. bitcoin ETF approval sees $4.6 billion trading volume on launch day

Why it’s important

The move comes as inflows into muni ETFs have slowed somewhat to $5.4 billion in 2024, compared with more than $15 billion a year earlier. However, interest spiked in June with inflows of over $2 billion, the highest monthly inflow this year, according to Bloomberg Intelligence data.

Goldman Sachs has previously launched a passively managed municipal ETF, but it has struggled to attract investors in a crowded market dominated by major players such as BlackRock and Vanguard Group. These two firms alone control more than half of the total assets in the passively managed municipal ETF sector, according to Bloomberg data.

Recognising the high demand for tax-efficient investments in high-tax states, Goldman Sachs is launching new ETFs tailored to these markets. The Goldman Sachs Dynamic New York Municipal Income ETF focuses on New York tax-exempt debt, while another fund targets California investors. These areas have a strong appetite for municipal bonds that offer tax-free interest, making them particularly attractive.