If no one else beats them to the punch, PowerShares intends to offer the first family of municipal bond exchange-traded funds. The Lisle, Ill.-based ETF manager expects its first two offerings, the PowerShares Insured Municipal Bond and the PowerShares National Municipal Bond portfolios, to begin trading in October.
The ETF municipal bond portfolios will incorporate rules-based indexes to be provided by Merrill Lynch.
The Insured Muni portfolio is based on the soon-to-be-launched Merrill Lynch U.S. Insured Core Municipal Securities index, which will track the performance of dollar-denominated AAA insured tax-exempt long-term debt publicly issued by U.S. municipalities in the U.S. domestic market.
The National Muni ETF will track the Merrill Lynch U.S. Core Municipal Securities index, which will follow dollar-denominated investment-grade tax-exempt long-term debt publicly issued by a U.S. municipality in the U.S. domestic market.
“We are very proud to be working on another first for the ETF marketplace and to be working with Merrill Lynch on such an important initiative,” says PowerShares president Bruce Bond. “These new portfolios represent important additions to the industry and to our existing family of 95 ETFs.”
Both indexes exclude single- and multi-family housing bonds, tobacco bonds and all securities subject to AMT (Alternative Minimum Tax). Each will be readjusted on a monthly basis.
According to PowerShares, these fixed-income ETFs will target investors that want diversified exposure to a portfolio of municipal bonds in an affordable and convenient package.
Ron DeLegge is the San Diego-based editor of www.etfguide.com.