iShares Launches Muni-Bond ETFs
By Michael Johnston, founder of
In what could be the first of many new product launches, iShares introduced a line of new municipal bond, or "muni," ETFs on Friday.
Unlike existing muni bond products that are generally diversified across maturities, the iShares S&P AMT-Free Municipal Series includes six funds with a planned-end date and targeted range of maturities.The new funds include: iShares 2012 S&P AMT-Free Municipal Series (MUAA), iShares 2013 S&P AMT-Free Municipal Series (MUAB), iShares 2014 S&P AMT-Free Municipal Series (MUAC), iShares 2015 S&P AMT-Free Municipal Series (MUAD), iShares 2016 S&P AMT-Free Municipal Series (MUAE) and iShares 2017 S&P AMT-Free Municipal Series (MUAF). Each of the funds in the series is structured as an open-end fund, which holds AMT-free, investment-grade and noncallable municipal bonds until the final months of its operations, when these bonds begin to mature and the portfolio transitions to tax-exempt cash and cash-like instruments. These targeted new products have the potential to be extremely useful in a number of ways, allowing investors and advisors to fill in holes in fixed income portfolios and implement customized strategies. Municipal bond ETFs have become increasingly popular in recent years. Currently, the ETF screener shows 20 muni bond funds with more than $6 billion in aggregate assets. The new iShares ETFs each charge an expense ratio of 0.30%, making them competitive with existing products.
Year Of The Bond ETFConsidering the huge cash inflows to fixed income ETFs in the last year, the relative paucity of bond ETFs (fewer than 100 funds) is a bit surprising. The expansion of iShares' muni bond platform could be the first of several new product launches this year. Claymore has filed for approval on a similar line of corporate bond funds, including 10 ETFs with specific maturities ranging from 2011 to 2020.
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