iShares has extended its lineup of fixed-income ETFs with the launch of a new series of targeted-maturity municipal bond ETFs.
The series, which is a first-of-a-kind in the space, is a group of bond ETFs targeting issues maturing in individual years, from 2012 to 2017. They are all open-end funds that invest in AMT-free noncallable national municipal bonds through maturity. When the holdings mature, the portfolio shifts that portion of the portfolio into cash, with the fund's assets distributed among shareholders once the last holding matures.
The company says the new funds will be useful for date-specific purposes, for strategies such as laddering, or for simply rounding out investor portfolios.
The fund family includes the following:
- iShares 2012 S&P AMT-free Municipal Series (NYSEArca: MUAA)
- iShares 2013 S&P AMT-free Municipal Series (NYSEArca: MUAB)
- iShares 2014 S&P AMT-free Municipal Series (NYSEArca: MUAC)
- iShares 2015 S&P AMT-free Municipal Series (NYSEArca: MUAD)
- iShares 2016 S&P AMT-free Municipal Series (NYSEArca: MUAE)
- iShares 2017 S&P AMT-free Municipal Series (NYSEArca: MUAF)
The funds will track a series of S&P indexes—the S&P AMT-free Municipal Index series—each with its corresponding year. They come with an expense ratio of 30 basis points.
iShares has several fixed-income vehicles in its roster of offerings, four of them being in the municipal bond segment.
Perhaps its largest, the iShares S&P National AMT-Free Municipal Bond Fund (NYSEArca: MUB)—which also tracks a S&P National AMT-Free Municipal Bond Index—has some $1.6 billion in total net assets, and posted returns of 10.5 percent in 2009. MUB comprises bonds of all maturities, but the portfolio has an average maturity of roughly eight years.
Still, the timing of the launch is interesting, given many analyst predictions for a tough year in the bond market ahead, as Treasury yields continue to rise and the Fed prepares to slow down its easing strategies, which could lead to higher interest rates.
You can read more about the funds here.