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Pimco launches short term municipal bond strategy fund

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Investment management firm Pimco has launched the Pimco Short Term Municipal Bond Strategy Fund, expanding its line up of actively managed exchange-traded funds covering the municipal yield curve.

The fund accesses Pimco’s municipal bond expertise in building a portfolio of primarily high-quality, short maturity, AMT-free municipal bonds whose income is exempt from federal and, in some cases, state tax.

The fund will be managed by John Cummings (pictured), executive vice president and head of Pimco’s municipal bond desk.

"As cities and states face ever-greater challenges in managing their budgets, issuer-specific credit analysis has become essential to succeeding as a municipal bond investor," says Cummings. "With SMMU, Pimco will look to use its proven credit expertise to provide investors with a carefully selected, diversified portfolio of short maturity municipal bonds with the complete transparency and accessibility of an ETF."

Unlike index funds that may rely solely on ratings agencies for credit analysis, Pimco analyses each municipality’s ability to pay obligations, collect taxes, benefit from federal stimulus and other factors, along with a detailed evaluation of the structure of each bond issue, before a decision is made to purchase a security.

In addition, the firm’s size, presence and relationships in municipal bond markets may enhance the ability to receive attractive pricing and execution on each trade.

Because the fund is actively managed, Pimco can focus on adjusting the portfolio as credit conditions change and also manage losses in an effort to increase the fund’s tax efficiency.

It is the firm’s third actively managed ETF and second municipal bond ETF, following the Pimco Intermediate Municipal Bond Strategy Fund launched on 30 November 2009.

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