We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
iShares launched a new fund last week, focused on providing exposure to the United States muni bond space.
iShares iBonds Dec 2024 Term Muni Bond ETF IBMM tracks the S&P AMT-Free Municipal Series Dec 2024 Index and comprises investment-grade, non-callable U.S. municipal bonds maturing in 2024.
Fund Characteristics
The fund’s index seeks to provide investors exposure to tax exempt income. The S&P AMT-Free Municipal Series Dec 2024 Index invests in bonds, so that investors can collect the bond’s face value at maturity. It has amassed AUM of $2.5 million within a few days of trading and has a low expense ratio of 18 basis points a year.
From a geographical perspective, the fund has significant exposure to high tax states. The new tax law sets a ceiling for state and local deductions taxpayers at $10,000, making these investment vehicles attractive for investors with high tax bills. IBMM has 10.1% exposure to California and 7.7% to New York.
How Does it Fit in a Portfolio?
The U.S. market recently saw a selloff on fears of rising interest rates. The S&P 500 entered correction territory, as it declined more than 10% from the record high set in January. Moreover, fears of a trade war sparked further fears in the markets.
Muni bonds offer great diversification potential to traditional portfolios, in times of market uncertainty. Moreover, the Fed hiked its interest rates by 25 basis points in its most recent FOMC meeting and further hikes are expected in 2018. Short to intermediate bond ETFs are less sensitive to interest rate changes compared to their long-term counterparts and as a result safeguard investors during uncertain times (read: Here's Why Short-Term Muni Bond ETFs Might Seem Appealing).
Moreover, target-date bond ETFs offer investors a unique way to reduce the risk of losing their principal amount when rates go up. This is because investors can utilize multiple ETFs with varying maturity dates in order to minimize interest rate risk and diversify credit risk.
Competition
The fund faces intense competition. Below we discuss a few ETFs that seek to provide exposure to muni bond ETFs.
SPDR Barclays Short Term Municipal Bond (SHM - Free Report)
This fund seeks to provide exposure to the municipal bond space in the United States. It has AUM of $3.8 billion and charges a low fee of 20 basis points a year. It has option-adjusted duration of 2.79 years and average maturity of 3.05 years.
From a geographical perspective, the fund has significant exposure to high tax states, with 18.6% exposure to California and 14.9% to New York. From a sector look, the fund has top exposure to GO State, GO Local and Special Tax, with 31.4%, 24.3% and 12.9% allocation, respectively. The fund has lost 0.2% in a year.
VanEck Vectors AMT-Free Short Municipal Index ETF (SMB - Free Report)
This fund seeks to provide exposure to the municipal bond space in the United States. It has AUM of $215.7 million and charges a low fee of 20 basis points a year. It has effective duration of 3.18 years and average maturity of 4.49 years.
From a geographical perspective, the fund has 14.3% exposure to New York and 13.2% to California. From a sector look, the fund has top exposure to State, Local and Transportation, with 26.1%, 16.7% and 13.5% allocation, respectively. The fund has returned 0.03% in a year.
PIMCO Intermediate Municipal Bond Strategy Fund (MUNI - Free Report)
This fund seeks to provide exposure to the municipal bond space in the United States. It has AUM of $272.1 million and charges a fee of 35 basis points a year. It has effective duration of 4.86 years and effective maturity of 5.30 years.
From a geographical perspective, the fund has significant exposure to high tax states, with 11.9% to New York and 4.9% to California. From a sector look, the fund has top exposure to Hospital, State/Local GO and Transportation, with 16.5%, 15.8% and 13.9% allocation, respectively. The fund has returned 2.3% in a year.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
iShares Launches Target-Date Muni Bond ETF
iShares launched a new fund last week, focused on providing exposure to the United States muni bond space.
iShares iBonds Dec 2024 Term Muni Bond ETF IBMM tracks the S&P AMT-Free Municipal Series Dec 2024 Index and comprises investment-grade, non-callable U.S. municipal bonds maturing in 2024.
Fund Characteristics
The fund’s index seeks to provide investors exposure to tax exempt income. The S&P AMT-Free Municipal Series Dec 2024 Index invests in bonds, so that investors can collect the bond’s face value at maturity. It has amassed AUM of $2.5 million within a few days of trading and has a low expense ratio of 18 basis points a year.
From a geographical perspective, the fund has significant exposure to high tax states. The new tax law sets a ceiling for state and local deductions taxpayers at $10,000, making these investment vehicles attractive for investors with high tax bills. IBMM has 10.1% exposure to California and 7.7% to New York.
How Does it Fit in a Portfolio?
The U.S. market recently saw a selloff on fears of rising interest rates. The S&P 500 entered correction territory, as it declined more than 10% from the record high set in January. Moreover, fears of a trade war sparked further fears in the markets.
Muni bonds offer great diversification potential to traditional portfolios, in times of market uncertainty. Moreover, the Fed hiked its interest rates by 25 basis points in its most recent FOMC meeting and further hikes are expected in 2018. Short to intermediate bond ETFs are less sensitive to interest rate changes compared to their long-term counterparts and as a result safeguard investors during uncertain times (read: Here's Why Short-Term Muni Bond ETFs Might Seem Appealing).
Moreover, target-date bond ETFs offer investors a unique way to reduce the risk of losing their principal amount when rates go up. This is because investors can utilize multiple ETFs with varying maturity dates in order to minimize interest rate risk and diversify credit risk.
Competition
The fund faces intense competition. Below we discuss a few ETFs that seek to provide exposure to muni bond ETFs.
SPDR Barclays Short Term Municipal Bond (SHM - Free Report)
This fund seeks to provide exposure to the municipal bond space in the United States. It has AUM of $3.8 billion and charges a low fee of 20 basis points a year. It has option-adjusted duration of 2.79 years and average maturity of 3.05 years.
From a geographical perspective, the fund has significant exposure to high tax states, with 18.6% exposure to California and 14.9% to New York. From a sector look, the fund has top exposure to GO State, GO Local and Special Tax, with 31.4%, 24.3% and 12.9% allocation, respectively. The fund has lost 0.2% in a year.
VanEck Vectors AMT-Free Short Municipal Index ETF (SMB - Free Report)
This fund seeks to provide exposure to the municipal bond space in the United States. It has AUM of $215.7 million and charges a low fee of 20 basis points a year. It has effective duration of 3.18 years and average maturity of 4.49 years.
From a geographical perspective, the fund has 14.3% exposure to New York and 13.2% to California. From a sector look, the fund has top exposure to State, Local and Transportation, with 26.1%, 16.7% and 13.5% allocation, respectively. The fund has returned 0.03% in a year.
PIMCO Intermediate Municipal Bond Strategy Fund (MUNI - Free Report)
This fund seeks to provide exposure to the municipal bond space in the United States. It has AUM of $272.1 million and charges a fee of 35 basis points a year. It has effective duration of 4.86 years and effective maturity of 5.30 years.
From a geographical perspective, the fund has significant exposure to high tax states, with 11.9% to New York and 4.9% to California. From a sector look, the fund has top exposure to Hospital, State/Local GO and Transportation, with 16.5%, 15.8% and 13.9% allocation, respectively. The fund has returned 2.3% in a year.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>