PIMCO has launched the PIMCO Short Term Municipal Bond Strategy Fund, an actively managed exchange-traded fund. The fund will invest in high-quality, short-maturity, alternative minimum tax-free municipal bonds whose income is exempt from federal and, in some cases, state tax. John Cummings, executive vice president and head of the municipal bond desk at PIMCO, will manage the fund.

“As cities and states face ever-greater challenges in managing their budgets, issuer-specific credit analysis has become essential to succeeding as a municipal bond investors,” Cummings said. “PIMCO will look to use its proved credit expertise to provide investors with a carefully selected, diversified portfolio of short maturity municipal bonds with the complete transparency and accessibility of an ETF.”

While index funds rely on ratings agencies for credit analysis, PIMCO will analyze each municipality’s ability to pay obligations, collect taxes, benefit from federal stimulus and other factors. It will also carefully evaluate each bond issue.

This is PIMCO’s third actively managed ETF and its second municipal bond ETF, the first being the PIMCO Intermediate Municipal Bond Strategy Fund.

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