Today, August 15, is the last trading day for iShares 2014 S&P AMT-Free Muni Bond ETF (MUAC). Unlike most of the 404 ETF and ETN closures that preceded it, MUAC’s closure was both expected and well planned. Since its launch in January 2010, its stated objective has been to track an index composed of investment grade U.S. municipal bonds maturing after May 31 and before September 1, 2014.
I’m a huge fan of term maturity bond funds. In my opinion they combine the best feature of bond funds (diversification) with the best feature of individual bonds (specific maturity / repayment date). For MUAC, the maturity date has arrived. Investors have been receiving regular monthly dividends, and they will get their initial investment back next week.
Some investors will earn a small capital gain on the liquidation, while others will take a small loss. MUAC has traded between $50 and $52 most of its life, and it is expected to liquidate at about $51.15 per share. Investors who bought the ETF in its first few days of trading should have received a total return of about +1.4% per year since early 2010. This may not seem like much, but the monthly distributions were tax-free and municipal money market funds only generated about 0.01% a year over the same period.
Term maturity bond ETFs are useful for building bond ladders with a portion (step) maturing each year. Other maturity dates available in the iShares iBonds AMT-Free Muni series include 2015 (IBMD), 2016 (IBME), 2017 (IBMF), 2018 (IBMG), 2019 (IBMH), and 2020 (IBMI). Please refer to the MUAC home page and liquidation FAQ for additional information.
Disclosure covering writer, editor, and publisher: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.