Sterling Capital National Municipal Bond ETF (SCNM)

Overview

SCNM is an actively managed exchange-traded fund (ETF) that is designed to provide current income while ensuring that earnings remain exempt from regular federal income taxes. The fund focuses on capital preservation by investing in a diverse range of municipal instruments, which can vary in maturity, as long as the interest earned is exempt from federal income tax obligations. SCNM is permitted to allocate investments without a cap into municipal instruments that are subject to the federal alternative minimum tax (AMT). In addition, the fund can invest up to 20% of its assets in other forms of debt and fixed income investments, providing flexibility in its capital allocation strategy.

The management of SCNM is characterized by a top-down investment approach where the portfolio manager places significant emphasis on analyzing interest rates and credit quality. The selection of securities is based on predetermined targets that are continually adjusted according to expected changes in interest rates. This proactive adjustment aims to maintain optimal interest rate sensitivity within the portfolio. Additionally, the fund may invest in pooled investment vehicles, such as ETFs, and utilize derivatives to enhance returns and manage risks effectively.

Products and Services

• Municipal Instruments

  SCNM primarily invests in municipal instruments of varying maturities, ensuring that the interest accrued is tax-exempt under federal law. This is a crucial offering for investors seeking tax efficiency in their fixed-income portfolios while relying on stable income streams.

• Alternative Minimum Tax (AMT) Municipal Instruments

  The fund is authorized to invest without limitation in municipal instruments that are subject to the federal alternative minimum tax (AMT). This allows investors to access a broader range of investment opportunities while still benefiting from certain tax exemptions.

• Debt and Fixed Income Investments

  SCNM can allocate up to 20% of its assets towards other debt and fixed income investments, thereby enabling diversification. This aspect of the fund allows it to hedge against risk and potentially enhance returns on a broader scale.

• Investment Grade and Below Investment Grade Instruments

  The fund maintains a strict policy by capping investments in below investment grade municipal instruments to no more than 10% of its assets. This strategic limitation helps mitigate risk and emphasizes credit quality in the investment portfolio.

• Top-Down Management Strategy

  The portfolio manager employs a top-down approach to investing, focusing on macroeconomic factors such as interest rates and overall credit quality. This method allows for informed decision-making that takes into account wider economic trends and potential market movements.

• Dynamic Investment Targeting

  The securities selected by the fund are based on targets that are regularly reviewed and adjusted in response to anticipated interest rate fluctuations. This ensures that the fund remains responsive to market conditions, thereby optimizing its performance.

• Pooled Investment Vehicles and Derivatives

  SCNM has the capability to invest in pooled vehicles, including other ETFs, providing additional opportunities for diversification. Moreover, the use of derivatives can help manage risks and enhance potential returns, allowing the fund to adapt strategies to changing market dynamics.