iShares, the world’s largest ETF firm by assets, today is launching a target-date-maturity municipal bond fund with a 2018 maturation date that will add another rung to the ladder of the company’s existing lineup of muni bond ETFs.
The iShares 2018 S'P AMT-Free Municipal Series (MUAG) will track a benchmark comprising some 1,400 securities and own investment-grade municipal bonds maturing in 2018. The fund comes with an expense ratio of 0.30 percent.
MUAG, which first went into registration in 2011, essentially equates to owning individual credits, but investors can hold them to maturity, while reaping the benefits of owning a diversified portfolio and managing interest rate risk.
MUAG’s launch comes five years before the portfolio matures, at which time it will close with investors getting back their principal minus expenses.
That means they are able to minimize their exposure to the still-rare event of a municipality defaulting, and investors—especially those with short-term goals—have embraced the strategies.
"Clients such as asset managers and wealth advisors wanted a municipal iShares ETF that acted more like an individual bond," iShares' head of fixed income strategy Matthew Tucker said in a press release. "The series provides clients with an important set of tools to build more diversified municipal bond ladders."
San Francisco-based iShares began offering its target-date funds in 2010, and the roster of funds now comprising five funds canvassing 2013 through 2017 maturities has been steadily gathering assets. iShares has already put into the regulatory pipeline a 2019 target data fund as well.
The existing iShares target-date muni bond ETFs and their current assets are:
- iShares 2012 S'P AMT-Free Municipal Series (MUAA), $27.8 million
- iShares 2013 S'P AMT-Free Municipal Series (MUAB), $38.0 million
- iShares 2014 S'P AMT-Free Municipal Series (MUAC), $49.0 million
- iShares 2015 S'P AMT-Free Municipal Series (MUAD), $58.5 million
- iShares 2016 S'P AMT-Free Municipal Series (MUAE), $56.3 million
- iShares 2017 S'P AMT-Free Municipal Series (MUAF), $72.2 million
Bonds must have a minimum maturity par amount of $2 million to be eligible for inclusion, and mature between June 1 and August 31, 2018, the latest prospectus for the fund said.
When the fund reaches its distribution date, it will distribute all of its net assets, after deduction of any liabilities, to investors, the company said.
"For an investment into one of the iShares Muni Series ETFs, the yield profile is expected to be comparable to that of a portfolio of municipal bonds of similar maturity and credit quality," iShares said in the release.
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