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Eaton Vance launches Build America Bond Fund


Eaton Vance Management has launched the Eaton Vance Build America Bond Fund, America’s first actively managed mutual fund designed for investment in taxable municipal obligations issued under the American Recovery & Reinvestment Act 2009.

The legislation was introduced to provide sweeping stimulus for the US economy.

"Build America Bonds represent a win for municipalities, a win for investors and a win for America," says Payson Swaffield, chief income investment officer at Eaton Vance. "Build America Bonds are being used to fund the building and repair of our nation’s bridges, highways, transit systems, schools and other infrastructure, often at lower cost than traditional municipal finance. For taxable fixed income investors, Build America Bonds represent an entirely new asset class that can enhance portfolio diversification."

Similar to tax-exempt municipal bonds, Build America Bonds are primarily of high credit quality, with approximately half of all Build America Bonds issued to date rated AA or higher and the majority of the remainder rated A.

In contrast to tax-exempt bonds, the interest earned on Build America Bonds is taxable to the recipient and issuers of Build America Bonds receive a direct payment from the federal government equal to 35 per cent of the interest paid.

"For investors, what’s compelling about Build America Bonds is their potential for corporate bond-like income combined with the credit quality profile of municipal bonds," says Cynthia Clemson, co-director of municipal investments at Eaton Vance and co-manager of Eaton Vance Build America Bond Fund. "Think of Build America Bonds as providing an opportunity to earn yields comparable to similarly rated corporate bonds, but with potentially higher credit quality."

The fund will be managed by Clemson and Craig Brandon.

The fund offers three classes of shares for purchase, each with a minimum investment of USD1,000.

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