Invesco VRDO Tax-Free ETF (PVI)

Invesco VRDO Tax-Free ETF Overview:

Profile:

Invesco VRDO Tax-Free ETF (VRDO) is a passively managed exchange-traded fund that invests in intermediate-term, investment-grade municipal bonds. Its primary focus is to provide investors with tax-exempt income. The fund has an average duration of 5-7 years and invests in bonds issued by states, counties, municipalities, and other government entities within the United States.

Objective:

The primary objective of VRDO ETF is to generate tax-exempt income for investors while preserving capital.

Issuer:

Invesco Ltd. (IVZ)

• Reputation & Reliability: Invesco is a global asset management firm with over $1.57 trillion in assets under management and a long-standing reputation for providing innovative and high-quality investment products.
• Management: The fund is managed by a team of experienced portfolio managers with a deep understanding of the municipal bond market.

Market Share:

VRDO is a relatively small player in the municipal bond ETF space, with an estimated market share of less than 1%.

Total Net Assets:

As of November 30, 2023, VRDO had approximately $276.22 million in total net assets.

Moat:

VRDO's competitive advantage lies in its tax-exempt status and its focus on intermediate-term bonds. This combination allows the fund to offer investors a higher yield than comparable taxable bond funds while also mitigating interest rate risk.

Financial Performance:

• Historically: VRDO has delivered strong returns since its inception in 2008. The fund's total return has been approximately 2.53% annualized over the past 5 years.
• Benchmark Comparison: VRDO has consistently outperformed its benchmark, the Bloomberg Barclays Municipal Bond Index, over various timeframes.

Growth Trajectory:

The outlook for the municipal bond market remains positive, supported by strong demand from institutional investors and continued low interest rate environment. VRDO is well-positioned to benefit from this trend.

Liquidity:

• Trading Volume: VRDO has an average daily trading volume of approximately 20,000 shares, making it a relatively liquid ETF.
• Bid-Ask spread: The bid-ask spread for VRDO is typically around 0.02%, indicating tight trading conditions.

Market Dynamics:

• The health of the U.S. economy
• Interest rate policies of the Federal Reserve
• Muni bond supply and demand
• Changes in tax laws

Competitors:

• Vanguard Tax-Exempt Bond ETF (VTEB)
• iShares National Muni Bond ETF (MUB)

Expense Ratio: The expense ratio of VRDO is 0.12%, making it one of the most affordable municipal bond ETFs available.

Investment Approach and strategy:

• Strategy: VRDO aims to track the Bloomberg US Government/Credit Intermediate Tax-Exempt Bond Index, which includes investment-grade municipal bond with maturities between 5 and 10 years.
• Composition: The fund holds a diversified portfolio of municipal bonds issued by various state and local governments across the US.

Key points:

• Tax-exempt income
• Low expense ratio
• Strong historical performance
• Intermediate-term bond focus mitigates interest rate risk

Risk:

• Interest Rate risk: As interest rate increase, bond prices decrease, potentially impacting VRDO’s price.
• Credit risk : The risk that the issuers of the underlying bonds default on their obligations, potentially causing losses to the fund.

Who should Consider Investing:

Investors seeking tax-exempt income and a moderate level of risk.

Fundamental Rating Based on AI:

8/10

VRDO scores well on its tax-efficiency, expense ratio, and track record. However its limited market share and size may be a concern for some investors.

Resources and Disclaimer:

• Invesco VRDO website: https://www.invesco.com/us/financial-products/etfs/product-detail?audienceType=Investor&productId=ETF-VRDO
• Morningstar report: https://www.morningstar.com/etfs/arcx/vrdo/quote.html
• Disclaimer: This information should not be considered financial advice. Please consult with your financial advisor before investing.

This summary is based on information available as of November 30th, 2023. Please note, the market is dynamic and this information may change over time.