American Century California Municipal Bond ETF (CATF) seeks to provide current income exempt from federal and California state taxes by investing in California municipal bonds. This fixed-income ETF targets debt securities issued by California state and local governments, agencies, and authorities to fund public projects.
How It Works
CATF employs an actively managed approach to select California municipal bonds across various maturities, credit qualities, and issuing entities. The fund's portfolio managers evaluate credit risk, interest rate sensitivity, and tax-equivalent yields when constructing the portfolio. Holdings typically include general obligation bonds, revenue bonds, and other municipal debt securities from California issuers, with regular rebalancing based on market conditions and credit assessments.
Key Features
- Double tax exemption for California residents—income typically exempt from both federal and California state taxes
- Launched in July 2024 with 2.82% dividend yield, providing regular tax-advantaged income for qualifying investors
- Active management allows flexibility to navigate California's diverse municipal credit landscape and optimize risk-adjusted returns
Risks
- This ETF can lose value if interest rates rise significantly, as bond prices move inversely to rates, potentially causing 5-15% declines
- California-specific credit events like budget crises, natural disasters, or economic downturns could disproportionately impact fund performance compared to national municipal ETFs
- Tax law changes eliminating state tax deductions or municipal bond exemptions could reduce the fund's primary value proposition for investors
Who Should Own This
Best suited for California residents in high tax brackets seeking tax-advantaged income with low-to-moderate risk tolerance and 3+ year time horizons. Should comprise 10-30% of fixed-income allocation as a satellite holding. Particularly valuable for investors facing combined federal and state tax rates above 30% who prioritize after-tax income over total return.