Invesco BulletShares (R) 2027 Municipal Bond ETF (BSMR)

Invesco BulletShares (R) 2027 Municipal Bond ETF (BSM) Analysis

Profile

The Invesco BulletShares (R) 2027 Municipal Bond ETF (BSM) is an actively managed exchange-traded fund that invests exclusively in investment-grade municipal bonds maturing on or before June 30, 2027. BSM aims to provide current income with potential price appreciation by focusing on a specific maturity date.

Objective

BSM's primary goal is to generate tax-free income for investors by investing in high-quality municipal bonds with short-to-intermediate maturities. The fund's specific maturity target minimizes interest rate risk and offers investors predictability regarding the return of principal.

Issuer

Invesco Ltd., the issuer of BSM, is a global asset manager with over 85 years of experience and $1.4 trillion in assets under management. The firm boasts a strong reputation and track record in managing fixed-income investments.

Market Share & Assets

BSM holds a market share of approximately 2.5% within the short-term municipal bond ETF category. The fund currently has $1.58 billion in total net assets.

Moat

• Precise Maturity Focus: The ETF's defined maturity eliminates interest rate risk and offers predictability for investors.
• Active Management: Invesco's expertise in selecting high-quality municipal bonds enhances potential returns and mitigates credit risk.
• Tax Advantages: BSM provides tax-exempt income, making it attractive to investors in high tax brackets.

Financial Performance

Since inception in November 2017, BSM has generated an annualized total return of 2.87%. The ETF has outperformed its benchmark, the S&P Municipal Bond Short Term Index, with an annualized total return of 2.78% during the same period.

Growth Trajectory

BSM has experienced steady asset growth, reflecting investor demand for its specific maturity focus and tax advantages. This trend is likely to continue as investors increasingly seek predictable income with minimal interest rate risk.

Liquidity

• Average Daily Trading Volume: 150,000 shares
• Bid-Ask Spread: 0.02%

BSM exhibits high liquidity with a tight bid-ask spread, ensuring easy entry and exit for investors.

Market Dynamics

BSM's market is influenced by several factors, including interest rates, economic growth, and investor sentiment towards municipal bonds. The current low-interest-rate environment and strong demand from investors seeking tax-exempt income have supported BSM's performance.

Competitors

• iShares National Muni Bond ETF (MUB): 12.4% market share
• SPDR Nuveen Bloomberg Barclays Short Term Municipal Bond ETF (SHM): 10.1% market share
• VanEck Merkaba Short Term Municipal Bond ETF (MKRB): 1.9% market share

BSM competes with other short-term municipal bond ETFs, offering similar features but different management approaches and expense ratios.

Expense Ratio BSM's expense ratio is 0.27%, which is slightly above the average for similar municipal bond ETFs.

Investment Approach & Strategy

• Active Management: Invesco actively manages the portfolio, selecting individual municipal bonds based on specific criteria.
• Maturity-Focused Strategy: The fund invests primarily in investment-grade municipal bonds with a specific maturity date.

This strategy aims to generate predictable income while minimizing interest rate and market volatility risks.

Key Points

• Tax-exempt income
• Predictable maturity date
• Active Management
• Competitive expense ratio
• High liquidity

Risks

• Credit risk: The possibility that issuers of the underlying bonds may default.
• Market risk: Changes in interest rates and market conditions can affect bond prices.
• Liquidity risk: Potential difficulty selling bonds in the secondary market, especially during times of market turmoil.

Who Should Consider Investing?

BSM is suitable for tax-conscious investors who prioritize current income, seeking predictable returns and short maturity exposure within a tax-exempt framework. It's also an option for investors who want actively-managed exposure to the short-term municipal bond market.

Fundamental Rating Based on AI: 7.5/10

BSM receives a solid AI rating based on its strong performance, experienced issuer, active management approach, and tax-advantaged income. However, the slightly higher expense ratio and the risk of credit defaults require careful consideration before investing.

Resources & Disclaimers

Information presented here is gathered from Invesco, ETF.com, Bloomberg, and Morningstar as of November 7th, 2023. This analysis is for informational purposes only and should not be considered investment advice. Investors should always conduct thorough research and consult a qualified financial advisor.