The exchange traded fund (ETF) family just got a little bit bigger. PIMCO has begun trading a new municipal bond fund that will give investors the opportunity to invest in a municipal bond portfolio that is actively managed.
Accrding to PIMCO, the PIMCO Short Term Municipal Bond Strategy Fund (NYSEArca: SMMU) will be made up of short-term, high-credit quality bonds that carry interest income, which is exempt from federal tax and, in some cases, state and local taxes. [Grail Advisors launches new active bond ETFs.]
PIMCO does not rely on rating agencies for credit analysis. Instead, the fund company will research each muni bond. PIMCO has more than 20 years of experience in dealing with municipal bonds.
The active management style offered will allow the fund manager to invest in issuers and securities that PIMCO endorses. Most importantly, the firm will be able to manage capital gains and losses in a way that will minimize the tax effect of gains and harvest losses when necessary. [Beware of a bond bubble.]