A fund will start to transition into maturity beginning in June of the end-date year. At this point, the fund will begin to shift its assets into cash and cash-equivalent vehicles as the bonds within the fund start to mature. By the end of August, the fund will have completely transitioned into cash and distributed its net assets to investors. [Muni Bond ETFs Scrutinized.]
Approximately six months before a fund matures, a new fund will open in the consecutive year of the longest-dated fund. Currently, the longest-dated fund is at 2017.
Monthly distributions will be treated as federal tax-exempt income while the end-date distribution will be treated as a sale for tax purposes. Thus, investors may realize capital gains or loss from the investment. [Bond ETFs Hot in Q1, But Look Out.]
These funds are particularly useful for meeting fixed-income needs, building ladders and targeting specific points on the municipal bond curve.
- iShares 2012 S&P AMT-Free Municipal Series (NYAR: MUAA)
- iShares 2013 S&P AMT-Free Municipal Series (NYAR: MUAB)
- iShares 2014 S&P AMT-Free Municipal Series (NYAR: MUAC)
- iShares 2015 S&P AMT-Free Municipal Series (NYAR: MUAD)
- iShares 2016 S&P AMT-Free Municipal Series (NYAR: MUAE)
- iShares 2017 S&P AMT-Free Municipal Series (NYAR: MUAF)
Sumin Kim contributed to this article.