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NEW YORK, Sept 10 (Reuters) - Barclays Global Investors on Monday launched the first municipal bond exchange-traded fund that trades on the American Stock Exchange.
The iShares S&P National Municipal Bond Fund is designed to track a liquid, institutional quality municipal bond index and its annual expense ratio is currently 0.25 percent, BGI said in a statement.
The product gives investors an opportunity to place low-cost bets on the $2.4 trillion U.S. municipal bond market without actually owning individual bonds directly.
Municipal bonds trade in the over-the-counter market rather than an organized exchange and can only be bought through a broker. A typical cost to a retail investor is 2 percent of a purchase price.
Exchange-traded funds are like mutual funds that track indexes, but trade on exchanges like stocks.
"Investors have been looking for a simple and cost-effective method of gaining exposure to the municipal market, which is traditionally less liquid and expensive marketplace, especially for those building a portfolio of individual issues," Noel Archard, head of U.S. iShares Product Development, said in a statement.
"The iShares S&P National Municipal Bond Fund looks to solve those problems," he added.
The index will include tax-exempt bonds sold by state and local governments that have a minimum rating of "BBB-minus" and a size of at least $50 million.
BGI is part of Barclays Plc (BARC.L: Quote, Profile , Research).
Similar funds have been proposed by State Street Global Advisors, PowerShares Capital Management and Van Eck.
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