Through its iShares brand, Barclays earlier this month filed registrations with the
These funds would work the same way as other muni ETFs with one critical exception: whereas most ETFs continue indefinitely, these would unwind at their target maturity and return the cash to shareholders.
In this respect, the six ETFs would bear some resemblance to unit investment trusts, which typically hold a basket of bonds and repay shareholders as the debt matures.
Since the advent of the municipal ETF sector a little more than two years ago, four companies have launched 18 muni ETFs, with several more in the pipeline. The sector had about $4.8 billion in assets at the end of August, according to the
These latest funds, which will complement iShares’ four existing muni ETFs, follow the general script of what an ETF does. The funds are publicly traded stocks that seek to replicate the performance of a benchmark index.
Each of the six will target an index maintained by
Standard & Poor’s provides a separate index for each maturity between 2012 and 2017.
Each ETF will try to mimic its target index by investing in a sampling of bonds representative of the index as a whole.
A pricing service determines the value of the fund’s assets every business day after the close of the market, and the shares presumably would trade in line with the value of their assets most of the time.
The ETFs will pay monthly dividends, but what distinguishes these ETFs from others is what happens when the fund reaches its target maturity date. Most other ETFs have to reshuffle their portfolios to keep up with their indexes as bonds mature or otherwise no longer resemble the broader indexes.
These funds will allow the bonds to mature and hold onto the cash. At the end of August in its maturity year, the fund will return the cash to ¬shareholders. In this way, buying a municipal bond ETF is similar to buying a municipal bond with a certain maturity.
The fund provides two features a municipal bond does not: diversity and the opportunity to trade on a stock exchange.
The funds will trade on the