Nuveen Investments last month proposed the latest in a proliferation of investment vehicles devoted to Build America Bonds: a BAB closed-end fund.
Last year, Invesco Powershares launched a BAB exchanged-traded fund and Eaton Vance established a BAB mutual fund.
As BABs consume a growing portion of municipal borrowing, they have spawned more investment vehicles dedicated to the product.
Nuveen is sub-adviser to a Canadian mutual fund devoted to BABs that launched this year.
Now, the Chicago-based firm has filed a registration statement for a closed-end fund that will invest mostly in BABs, the taxable municipal security created a little more than a year ago under the American Recovery and Reinvestment Act.
The fund will buy mostly investment-grade BABs with an average maturity of 15 to 35 years.
Most issuers that have tapped the taxable market under the BAB program have used it to issue long-term bonds. The average BAB matures in 28.5 years, according to a Wells Fargo index tracking the sector.
The fund intends to utilize leverage, either by borrowing money from a bank, issuing short-term securities, or buying products that themselves are leveraged.
Like most closed-end funds, the fund, which is called the Nuveen Build America Bond Term Fund, will pay monthly dividends.
Unlike most closed-end funds, this fund has a termination date. In 10 years, the fund will liquidate and distribute the proceeds to shareholders. Nuveen can delay the termination date by six months, or with shareholder approval extend the fund longer than that.
The fund will be managed by Daniel Close, who oversees 26 other municipal funds at Nuveen, and chief investment officer John Miller.
After issuing around $64 billion of BABs last year, municipalities have sold an additional $14 billion so far this year, according to Thomson Reuters.
Nearly 25% of municipal borrowing this year has been through BABs.
