Invesco has broadened its suite of defined maturity ETFs – branded ‘BulletShares’ – with the launch of a range of funds targeting the US municipal bond market.
Dan Draper, Global Head of ETFs at Invesco.
BulletShares
Unlike the majority of fixed income ETFs, which hold bonds for a limited period of time to maintain a specific maturity exposure, Invesco’s BulletShares ETFs hold underlying bonds until maturity, at which point the funds liquidate.
The ETFs offer a monthly income as well as a cash distribution at termination, thereby acting like an individual bond.
Compared to individual bonds, however, investors additionally benefit from increased liquidity and lower issuer-specific risk (greater diversification) thanks to the ETF wrapper.
By combining funds of varying maturities, investors can build portfolios that match their future cash requirements.
Municipal BulletShares
The range consists of nine funds with target maturities ranging between 2021 and 2029. Each fund is linked to an Invesco BulletShares USD Municipal Bond Index that consists of investment-grade municipal debt that is exempt from federal income tax.
To be eligible for inclusion in the index, a bond must have a minimum $15 million value outstanding and a maturity date that corresponds to the index’s target year. Callable municipal bonds are permitted in the indices with a bond’s first call date used as its maturity date.
Index reconstitution and rebalancing occur semi-annually and monthly, respectively, although no changes are made to the index in the final year of its maturity.
Each ETF is listed on Nasdaq Exchange and comes with an expense ratio of 0.18% which prices them in line with a similar range of funds offered by BlackRock, the iShares iBonds Term Muni Bond ETFs. These ETFs track S&P AMT-Free Municipal Series Indices and currently cover target maturities between 2020 and 2028.
Dan Draper, Global Head of ETFs at Invesco, commented, “Invesco launched the new BulletShares Municipal Bond ETF suite in response to continued investor interest in accessing new areas of fixed income through the innovation of an ETF wrapper. Since Invesco began managing the BulletShares ETFs there has been 34% growth in the suite, as investors continue to show enthusiasm for transparent and liquid fixed income exposure through a cost-effective alternative to individual bonds.”
Tim Urbanowicz, Director, Fixed Income ETF Strategy at Invesco, added, “Current global conditions may have complicated the search for yield. These conditions have also made an attractive case for municipal bonds, which offer a tax-advantaged way to access yield. By packaging municipal bonds of the same expiry into the BulletShares ETF, Invesco offers investors a diversified means to target precise spots on the municipal bond yield curve by holding a basket of bonds to maturity.”
The full line-up is as follows:
Invesco BulletShares 2021 Municipal Bond ETF (BSML US)
Invesco BulletShares 2022 Municipal Bond ETF (BSMM US)
Invesco BulletShares 2023 Municipal Bond ETF (BSMN US)
Invesco BulletShares 2024 Municipal Bond ETF (BSMO US)
Invesco BulletShares 2025 Municipal Bond ETF (BSMP US)
Invesco BulletShares 2026 Municipal Bond ETF (BSMQ US)
Invesco BulletShares 2027 Municipal Bond ETF (BSMR US)
Invesco BulletShares 2028 Municipal Bond ETF (BSMS US)
Invesco BulletShares 2029 Municipal Bond ETF (BSMT US)