Fixed Income: U.S. - Municipals Build America Bonds

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  • Overview
  • Efficiency
  • Tradability
  • Fit

ETF.com Insight

The U.S. Build America Bond segment presents two similar choices. Those looking for broad, neutral exposure will find BABS to be the most suitable. It does a great job of capturing theBABS does a great job of capturing the space space. At 35 bps, it doesn’t offer the lowest fee, but it tracks its index more consistently than BAB. BABS’ solid management and broad coverage make it our Analyst Pick for the segment.
BAB, tilts the away from our benchmark. It holds issues with shorter maturities, resulting in much shorter portfolio maturity and duration. However, it also offers the highest yield to maturity by tilting toward lower credit quality. The fund may be picking up further yield by holding much smaller issues. For more tactical investors, BAB is the most liquid fund by far, and it’s also the most popular by far— features that land the fund on our Opportunities List.
Note: Build America bonds are a dying breed. Since legislation that authorized the issuance of Build America Bonds expires, no new bonds will come to market. As such, unless funds broaden investment objectives, funds will gradually concentrate their positions in fewer securities as underlying bonds mature or called. (Insight updated 09/22/17)

All Funds (1)

BABS $67.26 M 67263593 Low on-screen liquidity

C 95
E
86
86
T
31
31
F
95
95

ETF.com Grade as 08/18/16

Fixed Income: U.S. - Municipals Build America Bonds

1 Year Total Return NAV
This chart is unavailable
Performance  [as of 08/23/16] 1 Month 3 Month YTD 1 Year 3 Years 5 Years 10 Years
Benchmark: 3.45%6.49%-0.56%15.93%10.94%10.71%--
C 94.901333BABS67263593BABSSPDR Nuveen Barclays Build America Bond ETF1.16%6.61%15.40%14.38%12.76%9.21%--
All returns over 1 year are annualized. All returns are total returns unless otherwise stated.

ETF.com Efficiency Insight

With such small difference in the Efficiency scores for the funds, investors should look past the scores to note some of the key differences between the funds.
Neither fund tracks theirBAB is the most popular fund in the segment by far respective index well on a consistently basis. Of the two, BABS shows a bit more precision and consistency in a relative context, leading to a slightly lower holding cost.
BABS, despite charging higher fees, tracks its index a bit more consistently. It has a smaller median tracking difference with a narrower range. 
Although BAB is the most popular fund in the segment by far, with over $700M in assets, it doesn’t track its underlying index well at all. Sloppy tracking undercuts the advantage of BAB’s lower fee. (Insight updated 09/22/17)

All Funds (1)

86
86.010797240337

ETF.com Grade as 08/18/16

Fixed Income: U.S. - Municipals Build America Bonds

Tracking Difference (12 Month)

Ticker Expense Ratio Median Max. Upside Max. Downside Max LT/ST Cap Gains Rate Rule Legal Structure Fund Closure Risk Efficiency
BABS SPDR Nuveen Barclays Build America Bond ETF -0.36% 0.42% -0.69% 20.00% / 39.60% Closing 86.010797240337

ETF.com Tradability Insight

BAB dominates the segment in Tradability, with over $4M changing hands on a daily basis. On the other hand, BABS doesn’t fall far behind in volume, with at least $1M in daily tradingBAB dominates the segment in Tradability activity.
Average spreads are indicative of the in-and-out costs that investors may experience: While BAB’s spreads stay manageable, hovering in the teen range. BABS’ spreads are much wider than that.
Still, larger investors should consider working with the fund issuer or a liquidity provider. For smaller investors, we advise using limit orders. (Insight updated 09/22/17)

All Funds (1)

31
30.76321663

ETF.com Grade as 08/18/16

Fixed Income: U.S. - Municipals Build America Bonds

Ticker Median Daily Volume ($) Average Spread Creation Unit/Day Market Hours Overlap Underlying Volume/Unit % Creation Cost Per Unit (%) Impediment to Creations Score - Tradability
BABS SPDR Nuveen Barclays Build America Bond ETF $655.75 K 0.10 100.00% -- 0.00% None 30.76321663
Spread History
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Premium/Discount History
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ETF.com/ Block Liquidity

BABS
5
4
3
2
1

This measurement shows how easy it is to trade 25,000 shares of each ETF.

ETF.com Fit Insight

There are two funds that offer different exposures to the Build America Bond marketplace.
BABS delivers the best overall exposure. The fund tracks the same index we chose as our segmentBAB leans hard toward the shorter end of the curve benchmark and does a great job of capturing the broad Build America Bond market. It delivers marketlike interest rate risk, credit risk and geographic exposure.
BAB tilts away from our segment benchmark. The fund leans hard toward the shorter end of the curve, with the lowest weighted average maturity in the segment, and therefore the least interest rate risk. BAB has a lower weighted average credit rating as our benchmark, squeezing out higher yield. Additionally, liquidity premium might also contribute to BAB’s higher yield: BAB uses a very low threshold ($1M) for outstanding bonds.
In sum, BABS delivers the most marketlike exposure and BAB takes more credit risk and benefited from liquidity premium which resulted in higher yield. (Insight updated 09/22/17)

All Funds (1)

95
94.901333

ETF.com Grade as 08/18/16

Fixed Income: U.S. - Municipals Build America Bonds