PowerShares Sets Sights On New Build America Bond ETF

By
ETF.com Staff
June 07, 2010
Share:

Related ETFs

Ticker Fund name
BABPowerShares Build America Bond
Related ETF Lists
Bond ETFs, Fixed Income ETFs, Muni ETFs

PowerShares, the Wheaton, Ill.-based firm best known for its Nasdaq-100 exchange-trade fund (NasdaqGM: QQQQ), filed papers with the Securities and Exchange Commission to add a second ETF focused on Build America Bonds, in the latest sign that investors are interested in this government-guaranteed and taxable piece of the municipal bond market.

The PowerShares Intermediate Build America Bond Portfolio (NYSEArca: BABI) will track the BofA Merrill Lynch 1-12 Year Build America Bond Index. The proposed new fund joins the PowerShares Build America Bond Portfolio (NYSEArca: BAB). “BAB” tracks the BofA Merrill Lynch Build America Bond Index.

The PowerShares ETF has gathered $340 million in assets since it was launched in November. The field of competitors is growing, most recently with a launch last month of State Street Global Advisors’ SPDR Nuveen Barclays Capital Build America Bond ETF (NYSEArca: BABS). Pimco, the world’s biggest bond fund manager, is also planning a Build America Bond ETF, the actively managed Pimco Build America Bond Strategy Fund.

Build America Bonds were launched in April 2009 as part of the Obama administration’s economic stimulus package. About 35 percent of interest payments are subsidized by the U.S. Treasury, making them attractive to cash-strapped municipalities and states. Build America Bonds are attractive to investors in part because, though they are taxable and their yields are comparable to those on corporate bonds, default rates on munis are lower than on corporates. More than 1,000 issues worth over $90 billion have been sold.

PowerShares’ and SSgA’s existing Build America Bond ETFs cost investors 0.35 percent a year in annual management fees. PowerShares didn’t say in its latest filing how much “BABI,” its latest planned offering in the space, would cost. Pimco also didn’t say how much its actively management Build America Bond ETF would cost.

ETF.COM CHANNELS

Want to learn more about smart-beta ETFs? Check out our smart-beta guide, essentials library and ETF screener!

ETF DAILY DATA

The AlphaDex financial fund 'FXO' led inflows on Tuesday, May 26, but net outflows and falling stocks pulled total U.S.-listed ETF assets down to $2.152 trillion.

A slew of redemptions from a number of iShares bond funds helped fuel that firm's issuer-leading outflows on Tuesday, May 26. Meanwhile, net outflows and a falling market dragged down total U.S.-listed ETF assets to $2.152 trillion.

ETF.COM ANALYST BLOGS

By Olly Ludwig

Yields will one day head higher, so is it time to get bond exposure outside the U.S.?

By Rachael Revesz

Stop dancing around the subject, call women ‘women’ and let’s be a more visible part of this industry.

By Olly Ludwig

It’s no secret that hedge funds love ETFs, but what’s less appreciated is that their love of ETFs will likely spell their demise.

By Olly Ludwig

Yes, bond yields are ticking higher these days, but it’s important to keep the whole yield-curve picture in mind.

ETF INDUSTRY PERSPECTIVE

By Nasdaq Global Indexes

Bond exposure or bond performance? Only defined maturity indexes provide the latter.

By Invesco PowerShares

Invesco PowerShares and Market Strategies International’s second annual survey provides vital insights about smart beta and ETFs overall.

By Invesco PowerShares

Investors are implementing smart-beta exchange-traded funds (ETFs) in their portfolios in a variety of ways and for different reasons.