Goldman Sachs Asset Management LP plans to launch a new municipal closed-end fund as part of its existing lineup of tax-exempt mutual funds, according to an Oct. 24 registration with the Securities and Exchange Commission. The addition, which is to be called the Goldman Sachs Municipal Opportunity Fund, will bring the firm's number of tax-free mutual funds to six.
A spokeswoman at Goldman said the firm was not able to comment on the filing, and could provide no other details.
According to the SEC filing, the fund is a closed-end investment company designed primarily for long-term investors and not as a trading vehicle. The minimum investment in the fund is $5,000, with no minimum amount required for subsequent investments.
The filing did not indicate a date on which the initial offering of the fund will commence.
The fund seeks a high level of current income that is exempt from regular federal income tax and may also consider the potential for capital appreciation, according to the SEC documents. Under normal market conditions, the fund will invest at least 80% of its net assets, plus any borrowings, in tax-exempt and municipal securities issued by or on behalf of states, territories, and possessions of the United States.
"Although it has no current intention to do so, the fund reserves the flexibility to issue preferred shares, debt securities, or to engage in borrowings, including through reverse repurchase agreements or dollar rolls, to add leverage to its portfolio. Any leverage used by the fund would be limited to 38% of the fund's total assets, including the proceeds of the leverage, at the time utilized," the filing stated.
The fund may also invest up to 75% of its total assets measured at time of purchase in investment-grade fixed-income securities and up to 75% of its total assets in high-yield municipal securities that are medium quality or non-investment grade.
The fund is a newly organized, nondiversified closed-end management investment company that currently offers one class of common shares, and pays dividends from its investment income and distributions from net-realized capital gains, according to the registration papers. The fund does not intend to list its shares for trading on any national securities exchange, and there is not expected to be any secondary trading market in the shares. Goldman Sachs Asset Management serves as investment adviser.
After an initial offering of the shares by Goldman, Sachs & Co., the distributor and principal underwriter, the fund may commence a continuous public offering of its shares at net asset value, but there is no guaranty the fund will offer its shares on a continuous basis or, if it does so, that it will do so indefinitely, the filing says.
Since the fund is an unlisted closed-end fund, shareholders are not able to have their shares redeemed or otherwise sell their shares on a daily basis. In order to provide some liquidity to shareholders, the fund will make quarterly tender offers to repurchase between 5% and 25% of its outstanding shares at net asset value. Still, the shares are considered illiquid and are not readily marketable, according to the filing.
Currently, Goldman Sachs Asset Management, which is the asset management arm of the Goldman Sachs Group Inc., manages five other tax-exempt mutual funds under its fixed-income umbrella: the Goldman Sachs California and New York AMT-Free municipal bond funds, the Goldman Sachs High-Yield Municipal Bond Fund, the Goldman Sachs Municipal Income Fund, and the Goldman Sachs Short-Duration Tax-Free Fund.
According to Goldman's Web site, its existing municipal fixed-income management process is "rooted in a philosophy of disciplined 'bottom-up' research, which seeks to recognize tactical opportunities, pricing mismatches, and strategic trends .... As a result of market inefficiencies, we believe our market access and expertise has historically been an important driver of risk-adjusted returns."
