BlackRock, Inc. is expanding its iShares Exchange Traded Fund business with a municipal bond fund.
The iShares Short Maturity Municipal Bond ETF, which will trade on the BATS Global Markets exchange under the ticker symbol MEAR, will invest in primarily investment-grade securities with maturities of five years or less and an effective duration of 1.2 years or less, under normal circumstances, BlackRock said in a press release Thursday.
It will identify opportunities on the front end of the yield curve and across the investment-grade spectrum with a triple-B rating or better. The fund currently holds a majority of double-A paper.
It will invest in U.S. dollar denominated, short-term fixed and floating rate municipal securities, including municipal bonds, municipal notes, and variable-rate demand obligations, money market instruments, and registered investment companies.
Cash equivalents currently account for 53% of the fund's credit breakdown, while the fund holds 64.5% in bonds with maturities one year and under, according to BlackRock.
BlackRock says the funds' main objectives include: putting cash to work in a low-yield environment, while generating and maximizing tax-free current income by investing in primarily investment-grade municipal bonds. In addition, it also aims to offer an appealing tax-equivalent yield; reduce taxes by owning at least 80% in municipal securities with interest exempt from U.S. federal and alternative minimum taxes, as well as minimize interest-rate risk and market volatility; add diversity to complement a long-term bond or multi-asset class portfolio.
It may, however, invest up to 20% of its net assets in municipal securities that pay interest that is subject to the federal AMT.
The fund will be actively managed by BlackRock's municipal bond team with 25 years experience, and backed by a dedicated municipal credit research team.
