The Barclays capital municipal bond index is an unmanaged index of the municipal bonds that are traded in the U.S. It includes the tax-exempt, fixed rate bonds and investment grade bonds which have long- term maturities and are selected from the issues that are larger than $50 million. It consists of about 18000 bonds from the Atlantic as well as the pacific states. It is more expensive that the municipal bond fund and is a bit more volatile due to the longer maturity of the bonds. Municipal bonds generally yield about 80% more than that of treasury bonds.
The investment provides the results corresponding to the yield and price performance of the index that tracks the municipal bond market in the U.S. and provides an income that is free from the federal income tax. The funds make use of a sampling strategy that helps to track the Barclays capital municipal bond index performance. It generally has an investment of about 80% of its total assets in the securities that comprise of the index.
The ETFs i.e. Exchange traded funds are easy and flexible to handle. They are bought and sold by the investors like stocks with the help of a brokerage account. Investors can also make use of the traditional techniques of stock trading, margin purchases, limit orders and stop orders by ETFs. It is listed on the US Stock Exchanges.
ETFs are subject to risks that are similar to the stocks that include short selling maintenance. After the calculation of the tax returns that is based on the net asset value with the use of federal marginal income tax rates they do not reflect upon the impact of local and state taxes. There are certain municipal bonds that offer diversification which the loss of principal unlikely. But it is not impossible by any means and it is riskier than the Treasury bonds.
The Barclays capital offers a market leading benchmark that meets the requirements of global investors that include market and investment analysis of the alpha as well as beta sources. The Barclays capital index supports the ERA i.e Equal Risk Association methodology. The ERA index makes use of volatility in order to determine the amount of investment of the Barclays capital proprietary indices.
It aims at providing risk controlled access to non correlated strategies of Barclays capital over a range of asset classes which provides a stable performance. This index addresses the concerns of the investors that demand stable returns and low risks. It makes the use of a robust methodology that minimizes the investment exposure when its returns turn more volatile.
It is a framework that is designed to merge the strategies to provide benefits of diversification and improvement in the risk return for investment strategies to the clients. The index has consistently produced risk adjusted returns with less draw downs.