By Michael Johnston, founder of
NEW YORK (
) -- Following a tremendously successful 2009 that saw more than
$40 billion flow into
fixed income ETFs, the number of bond ETFs is expected to increase significantly in 2010.
In what could be the first of many new product launches,
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
iShares 2013 S&P AMT-Free Municipal Series
iShares 2014 S&P AMT-Free Municipal Series
iShares 2015 S&P AMT-Free Municipal Series
iShares 2016 S&P AMT-Free Municipal Series
iShares 2017 S&P AMT-Free Municipal Series
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
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 ETF
Considering 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.
filed for approval
on a similar line of corporate bond funds, including 10 ETFs with specific maturities ranging from 2011 to 2020.